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FEMA - Case Laws
Showing 1 to 18 of 18 Records
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2020 (12) TMI 486 - MADRAS HIGH COURT
Interest liability u/s 42(3) of FERA - main ground on which the Petitioner claims interest is that Section 42(3) of FERA stipulates that interest is payable at 6% p.a. in all cases other than cases relating to confiscation either under Section 63 of FERA or under the Customs Act, 1962 - HELD THAT:- In present writ petition claiming interest was filed on or about 28.08.2009. It is clear that the writ petition was filed more than 9 years after receiving the rupee equivalent of UK Pounds 1800. Upon perusal of the affidavit, find that the Petitioner stated that she and her counsel visited the office of the 1st Respondent to request for the payment of interest and that she was constrained to file the writ petition on account of non-payment thereof. Apart from this statement, no explanation is offered for the delay and no written reminders are on record. If the Petitioner had filed a suit to recover interest, such suit would have been rejected in limine on the ground of limitation.
A public law remedy is discretionary and, in the overall facts and circumstances, including the complete failure to provide a reasonable explanation for the delay not inclined to exercise discretion in favour of the Petitioner who has approached the Court rather belatedly. Thus, writ petition is liable to be rejected solely on the ground of laches. In addition, as stated earlier, the Petitioner did not seek a modification of or challenge the order so as to claim interest.
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2020 (12) TMI 479 - DELHI HIGH COURT
Holding of inquiry against the petitioner in the manner provided in Rule 4 of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 - HELD THAT:- Impugned Show Cause Notice is at the first stage wherein the Adjudicating Authority on receiving a reply to the Impugned Show Cause Notice is to form an opinion whether an inquiry at all should be held against the petitioner.
At this stage we do not deem it appropriate to entertain this present petition. The petitioner shall be at liberty to raise all its contentions before the Adjudicating Authority. Needless to say, if the petitioner is aggrieved of the decision taken by the Adjudicating Authority, it shall always be open to the petitioner to challenge the same in accordance with law.
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2020 (12) TMI 187 - DELHI HIGH COURT
Permission for Direct Investment in certain cases - Remittance of equity subscription/loan/corporate guarantee/bank guarantee or through other permitted mode - additional financial commitment in JSPML by way of equity subscription/loan/corporate guarantee/bank guarantee, etc. - Denial of grant permission to the petitioner to make additional commitment/payment - respondent have rejected the application of the petitioner and have not granted permission for making the additional financial commitment/payment of USD 300 million on account of the objection raised by the Enforcement Directorate -
HELD THAT:- Respondent RBI by a cryptic non-speaking order has rejected the application of the petitioner without giving any reasons whatsoever.
The said order fails to give any reasons as to why the application of the petitioner is being rejected. The order has serious consequences for the petitioner inasmuch as the commitments undertaken abroad with the prior consent of the respondent would go into default causing huge losses to the petitioner. The reasons given latter in the counter-affidavit would normally not be accepted. It is settled position of law that the respondent cannot improve its case in this manner.
In the reasons that have been given for rejecting the application of the petitioner, there is absolutely no reference to any of the aforesaid factors stipulated in Regulation 9(3) of the 2004 Regulations as a ground for rejecting the application of the petitioner. The criteria stated in Regulation 9(3) may not be exhaustive and other issues may be taken into account if facts so warrant. However, no such facts are stated by the respondent. It is manifest that the said order dated 30.12.2019 is wholly contrary to Regulation 9 in question.
Can RBI, the respondent while dealing with an application filed under Regulation 9 reject the same at the behest of any other statutory agency like CBI, Enforcement Directorate, etc.? -
only basis for passing the impugned order is the objections raised by the ED.
It is settled position of law that an authority cannot share its power with someone else or allow someone else to dictate to it by declining an act or by submitting to their wishes or instructions. In this context reference may be had to the judgment of the Supreme Court in the case of Chintpurni Medical College & Hospital & Anr. [2018 (7) TMI 2153 - SUPREME COURT]where the Supreme Court noted that the State Government appears to have withdrawn the essentiality certificate acting on the dictates of the Medical Council of India. The Court observed that this itself would vitiate the withdrawal of the essentiality certificate by the State.
Hence, where the authority which is given to a functionary is exercised, at least in part, by the wrong authority, the resulting decision is ultra virus and void.
Admittedly the commitments and transactions carried out earlier by the petitioner with its wholly owned subsidiary were done with the prior consent and permission of RBI. By the impugned order, RBI seeks to take a uturn and seeks to refuse permission to the petitioner to complete transactions which have already been cleared earlier by the respondent. No plausible explanation is sought to be given as to why this volte face has taken place except relying upon the communication received from the ED.Clearly, there is no explanation why RBI seeks to set at naught the earlier permission given in this manner.
The matter is remanded back to RBI to reconsider the application made by the petitioner afresh as per law and in accordance with the principles noted above. Needful be done by RBI expeditiously. The transactions carried out pursuant to the interim orders of this court shall be treated as valid and in order
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2020 (11) TMI 1080 - RAJASTHAN HIGH COURT
Call for record under FEMA - reasonable time to call for information - Assistant Director, Directorate of Enforcement has called record/documents from the petitioner exercising power under Section 37 of Foreign Exchange Management Act, 1999 read with Section 133 (6) of the Income Tax Act, 1961 - As LD counsel submits that information sought from the petitioner is of export transactions since 2010 onwards and as such the information which has been sought by the respondent cannot be furnished by the petitioner, as record from the year (2 of 2) [CW-12937/2020] 2010 onwards, cannot be maintained by any person under the law also reasonable time does not mean that information can be called after inordinate delay of about 10 years - HELD THAT:- Issue notice of the writ petition as well as stay application, returnable on 17th December, 2020. Notices be given ‘dasti’, if prayed. In the meanwhile, further proceedings in pursuance of show cause notice dated 24th July, 2020 shall remain stayed.
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2020 (11) TMI 513 - ATFEMA
Restrictions on dealing in foreign exchange - diversion of exported goods, non-realisation of export proceeds, non-clearance of imported bills and write off/ set off - HELD THAT:- Trend Setters Group of Companies had failed to submit Bill of Entry as evidence for actual import of the goods. Trend Setters Group of Companies did not realised the substantial portion of export proceeds and it is also established that except filing a Suit before a Sub-Court in Ernakulam, Kerala and writing to the RBI for write off/ set off, no other steps have been taken. In other words, no sufficient and visible efforts have been by/ on behalf of the Trend Setters Group of Companies to realise the export proceeds.
Who was/were the person/persons responsible for the diversion of export goods / non-realisation of export proceeds and remittances of payment towards import of goods - Shri Sebastian Chokkattu was the Chairman of the Trend Setters Group of Companies and was overall in-charge of the same. It has also come on record that he was also a Director of the said group of companies. The Adjudicating Authority has imposed a total penalty of ₹ 42,15,000/- on Shri Sebastian Chokkattu. There is nothing on record that he has taken any sufficient steps/action to realise the export proceeds and that on the grounds stated in the Show Cause Notices and the reasons cited in the impugned order it is clear that exports were made and diverted. The nonrealisation of export proceeds cannot be said to be beyond the control.
Mere pendency of the application for set off/write off does not absolve the responsibility of the appellants. On the given facts and circumstances of the case, I do not find any infirmity or illegality in the impugned order passed by the Adjudicating Authority. Considering the amount involved in the contraventions, it is held that the amount of penalties imposed on Shri Sebastian Chokkattu, on the basis of individual Show Cause Notices wherein contraventions has been described in details, are proper and proportionate. Hence no interference in the findings arrived at by the Adjudicating Authority, in respect of Shri Sebastian Chokkattu, is called for.
Shri B. Balakrishnan was appointed as the Director of M/s. Intimate Apparels Pvt. Ltd. on 11.07.1995. It is seen from Copy of Form No.32 presented before the Registrar of Company on 14.08.1995 that Shri Sebastian Chokkattu presented the said form incorporating therein that Shri V.P. Gopalakrishnan Nair has resigned from the Directorship of the company from 11.07.1995 and Shri B. Balakrishnan appointed on the same date. Shri B. Balakrishnan became the Director from 11.07.1995 to 1997 by stepping in the shoe of Shri V.P. Gopalakrishnan Nair and thus was in-charge of and responsible to the said company for the conduct of the business of the company at the time when the aforesaid exports were made. Therefore, there is no illegality in the impugned order in holding Shri B. Balakrishnan as one of the contravener as alleged and the impugned order does not call for any interference as the penalty of ₹ 4,00,000/- imposed on him is just, proper and proportionate.
Shri Biju Thomas or Trend Setters Group of Companies have approached the Commercial Attache, Indian Embassy, Washington and the U.S. Ambassador to India for realisation of export proceeds. During the course of hearing the learned counsel for the appellants did not place any evidence in this regard. So, the contention raised in the appeals regarding the steps taken to realise the export proceeds cannot be believed.
However, there is nothing on record placed by the respondent nor there is anything in the impugned order and the SCNs that the appellant Shri Biju Thomas was looking after the day-to-day affairs of the Trend Setters Group of Companies. In the light of the same, the provision of Section 68(2) of FERA, 1973 is not attracted.Shri Biju Thomas cannot be held liable for contraventions of Sections 8(3) & 8 (4) of FERA, 1973 read with Paragraph 7A-20 of RBI Exchange Control Manual Vol- I,1993 Edition, Sections 18(2) & 18(3) read with Section 68 of FERA, 1973, the Central Government Notifications dated 01.01.1974. In view of the above, the findings of the Adjudicating Authority holding Shri Biju Thomas liable for the aforesaid contraventions and imposition of penalties are erroneous and not legal, hence, quashed and set aside.
Shri S. Sunil Kumar cannot be held liable for contraventions of Sections 8(3) & 8 (4) of FERA, 1973 read with Paragraph 7A-20 of RBI Exchange Control Manual Vol-I,1993 Edition, Sections 18(2) & 18(3) read with Section 68 of FERA, 1973, the Central Government Notifications dated 01.01.1974. In view of the above, the findings of the Adjudicating Authority holding Shri S. Sunil Kumar liable for the aforesaid contraventions and imposition of penalties are erroneous in law and not legal, hence, quashed and set aside.
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2020 (9) TMI 1031 - CALCUTTA HIGH COURT
Extension of the usance period of the Letter of Credit Facility sanctioned to the writ petitioners from 180 days to 270 days - distinction between the usance period of a Letter of Credit and the period of a Trade Credit - HELD THAT:- The argument that the 2018 Regulations brought about a change in policy regarding the usance period for credit does not hold water, since the said Regulations and the Master Direction on External Commercial Borrowings and Trade Credits dated July 1, 2015, updated up to October 6, 2015, relate to loans extended by overseas banks. The germane consideration in the present case is, rather, the Master Direction – Import of Goods and Services dated January 1, 2016 (updated lastly on April 1, 2019).
Trade Credit Policy – Revised Framework formulated by the RBI on March 13, 2019 does not alter the position as far as the usance period available to the petitioners was concerned.
As correctly argued by the respondents, a Court order cannot impose its own view to substitute the terms of the original contract between the parties and the petitioners cannot insist upon the discretion of the bank to extend the usance period of credit to be exercised in the petitioners’ favour as a matter of right.
as correctly argued by the respondents, a Court order cannot impose its own view to substitute the terms of the original contract between the parties and the petitioners cannot insist upon the discretion of the bank to extend the usance period of credit to be exercised in the petitioners’ favour as a matter of right.
The petitioners shall repay the loan amount pertaining to the credit facilities obtained from the State Bank of India (represented by the respondents) in respect of the loan-in-question within 30 days from date along with interest at the rate of 6 percent per annum from the date of expiry of the credit period of 180 days post-shipment till repayment. Failure to repay the said cumulative amount (principal with interest) within 30 days from date would entail imposition of interest at the rate of 18 percent per annum which the petitioners shall pay.
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2020 (9) TMI 697 - DELHI HIGH COURT
Detention Orders at the pre-execution stage - Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA Act) - HELD THAT:- Proposals for invoking the provisions of the COFEPOSA Act were mooted in the second week of October 2019 - overseas evidence was received from SPA Dubai in the first week of November 2019. The proposal to detain the petitioners was further analysed keeping in view the strong tendency to indulge in smuggling activities in future. The proposal for preventive detention of the petitioners was sent to the Detaining Authority on 02.01.2020. The proposal was placed before the Central Screening Committee on 13.01.2020, and the recommendations of the Central Screening Committee (CSC) were submitted to the Detaining Authority on 14.01.2020. The proposals were examined by the Detaining Authority, and after arriving at his subjective satisfaction, the Detaining Authority passed the Detention Orders dated 21.01.2020.
Aforesaid satisfactorily explains and justifies the time consumed in mooting the proposal for detention of the petitioners under the COFEPOSA Act and for consideration of the said proposal, firstly, by the Central Screening Committee, and thereafter, by the Detaining Authority. The time lapse, in our view, is not such as to lead to the inference that the live-link between the prejudicial activity of the petitioners, which was discovered in April 2019, and the object of detention, namely, to prevent them from indulging in such prejudicial activity, stood snapped. Pertinently, it is not the case of either of these petitioners that they have discontinued their ostensible business of dealing in gold and gold jewellery - observations in Muneesh Suneja [2001 (1) TMI 903 - SUPREME COURT] is attracted in the facts of these cases. We also agree with the submission of Mr. Mahajan that petitioners” reliance on Rajinder Arora [2006 (3) TMI 173 - SUPREME COURT is misplaced for the reasons advanced by Mr. Mahajan and recorded hereinabove. Therefore, we reject this submission of Mr. Chaudhri.
Whether the petitioners absconded and, if so, whether they are precluded from assailing the Detention Orders in respect of each of them on that account? - We are of the view that there is no merit in the petitioners” submissions that neither of the three petitioners was not absconding. Abscondence is not only a matter of physical disappearance, but also carries with it the intent to hide, disappear, or evade the concerned person, or authority.
A Detention Order would lose its force and object, if it were to be served upon the representative, or counsel, as the element of surprise would be lost – which is crucial to be able to detain a person, as there is every likelihood of the person absconding, or evading execution of the Detention Order the moment he learns that such an order had been passed. The respondents are not obliged to serve the Detention Order, the Grounds of Detention, or the Relied Upon Documents on a third party. If this submission of the petitioner MNK were to be accepted, it would render the law of preventive detention completely ineffective and not workable. The petitioner MNK, however, failed to provide his actual address where he could be served the Detention Order. If the petitioner MNK was not to be found at his ancestral address, there was no point of furnishing the same. Thus, we are satisfied that the petitioner MNK deliberately absconded to evade the service of the Detention Order.
So far as the petitioner APS is concerned, we find that the position is no different. The reason given by the petitioner APS for his not being found at his given address is completely belied by the reports submitted by the DCP, West District, New Delhi.
We find it very hard to believe that neither the petitioner APS”s wife, nor his father was aware of his whereabouts. Clearly, APS was in hiding and his wife and his father also feigned ignorance, which would be the case only if the petitioner APS were to instruct them not to disclose his whereabouts. We are, therefore, of the view that the petitioner APS is equally guilty of abscondence.
Petitioner Gopal Gupta - he was not found at his given address. His wife/ Smita was found at the said address who stated that the petitioner Gopal Gupta had gone somewhere in South India for his medical treatment and she did not have any knowledge about the exact whereabouts, and the date of arrival of her husband. This again, we find to be rather unusual that a wife would not know where her husband has gone and would not even know when he would arrive. In today”s day and age – when mobile communication is common place, we find the statement made by the petitioner Gopal Gupta”s wife Smt. Smita to be unacceptable and clearly the idea was to suppress the information with regard to the whereabouts of Gopal Gupta. The stand now taken by the petitioner Gopal Gupta – that he was at his father”s residence, is completely contradicted with the statement of his wife Smita.
We find that, firstly, the petitioners are not entitled to maintain these petitions in view of their conduct of abscondence and in view of the decision of the Supreme Court in Subhash Popatlal Dave [2013 (8) TMI 8 - SUPREME COURT]and even otherwise, we do not find any merit in any of the grounds taken by the petitioners to assail the Detention Orders issued in respect of each of them under Section 3 of the COFEPOSA Act at the pre-execution/ detention stage.
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2020 (9) TMI 392 - MADRAS HIGH COURT
Seizure and attachment of the bank account of the petitioner's father - grievance of the petitioner before this Court is that the bank account mentioned in the writ petition is not allowed to be operated by the petitioner under the guise of investigating the matter under FEMA and no order of attachment was passed by the first respondent at any point of time in respect of the said bank account and therefore, the petitioner cannot be prevented from operating the bank account - HELD THAT:- Investigation under FEMA is pending and the investigation conducted so far reveals that the amount inter alia lying in the subject matter bank account appears to have been involved in violation of provisions of FEMA. Though such counter affidavit is filed, when a specific question is put to the leaned counsel for the first respondent by this Court as to whether any order of freezing the account has been issued by the first respondent, he submitted that no such order is issued so far.
When it is stated that the first respondent has not issued any order freezing the subject matter bank account so far, no justification on the part of the first respondent in not allowing the petitioner to operate the bank account. Either the first respondent should pass an order in accordance with law to freeze the bank account or allow the petitioner to operate the bank account, in the absence of any such attachment order.
Without doing either of these things, the respondents make the petitioner to stand in a position namely neither here nor there. Therefore, this Court is of the view that it is for the first respondent to take a decision and if they choose to attach the bank account, it should be done only by the manner in which law so provides to do so.
Order - Since it is an admitted fact that the subject matter bank account is not so far issued with any order of attachment or freezing the account, it is open to the first respondent to pass any such order within a period of 30 days from the date of receipt of a copy of this order.
If the first respondent has not chosen to pass any attachment order as stated supra, the petitioner shall not be prevented from operating the bank account.
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2020 (8) TMI 44 - SUPREME COURT
Proceeding against a Director of a company for contravention of provisions of FERA, 1973 - Non-executive Director responsibility for the conduct of business of the Company - notice dated 19.02.2001 was issued by the Deputy Director, Enforcement Directorate to decide as to whether the adjudication proceedings as contemplated in Section 51 should be held against the Directors for contravention - HELD THAT:- The appellant had not submitted any reply to show cause notice dated 19.02.2001 which though was addressed to the Company and all Directors and the reply was sent only by the Company Secretary on 26.03.2001. The representation dated 29.10.2003 was the first representation submitted by the appellant before the adjudicating officer during course of personal hearing. What is said by a person who is called for personal hearing even though given in the form of written representation dated 29.10.2003 required to be considered by the adjudicating officer otherwise the personal hearing shall become an empty formality and meaningless, specially when what was said by the appellant in his representation dated 29.10.2003 in no manner contradicted the reply 26.03.2001 sent by the Company Secretary. We, thus, are of the considered opinion that written representation dated 29.10.2003 submitted by appellant required due consideration and the High Court erred in discarding it as an afterthought.
Whether the appellant has not brought any material on record either before the Adjudicating Authority or the Appellate Tribunal to prove that he was only a part-time, non-executive Director not responsible for the conduct of business of the Company at the time of commission of the offence? - Affidavit of Company Secretary dated 04.07.2003 clearly stating that the appellant who was Director of the erstwhile MXL was only a part time Director of the said Company and was never in charge of the day to day business of the Company was very much on the record of the adjudicating officer and the High Court erred in holding that the said material was not filed before the Adjudging Authority or the Appellate Tribunal.
High Court, thus, discarded the plea of the appellant that he was part-time, non-executive Director as afterthought and did not consider the same on the ground that the affidavit dated 04.07.2003 relied by the appellant was not filed which, as noted above, is not correct. There was nothing on record brought on behalf of the Department that the above plea of the appellant was incorrect and it was the appellant who was responsible for the conduct of business of the Company at the relevant time.
Thus, material was brought by the appellant on the record that he was a part-time, non-executive Director not in charge of the affairs of the Company at the relevant time, which was erroneously refused to be considered.
Contravention of provisions of Section 8(3), 8(4) and Section 68 of FERA, 1973 by the appellant - Plea of the appellant that he was part-time, non-executive Director not in charge of the conduct of business of the Company at the relevant time was erroneously discarded by the authorities and the High Court and there is no finding by any of the authorities after considering the material that it was the appellant who was responsible for the conduct of business of the Company at the relevant time. Thus, present is a case where the liability has been fastened on the appellant without there being necessary basis for any such conclusion.
Order which was passed on 13.02.2004 by the Deputy Director in adjudication proceedings although with regard to different period, the plea of the appellant that he was only a part-time, nonexecutive Director and not responsible of the conduct of business of the Company was accepted and notice was discharged against the appellant. The order dated 13.02.2004 although related to different period but has categorically noticed the status of the appellant as part-time non-executive Director. There being decision of Adjudicating Authority, in the recent past, passed on 13.02.2004, that the appellant was only a part-time nonexecutive Director of MXL, there has to be some reasons for taking a contrary view by the adjudicating officer in order dated 31.03.2004 with regard to affairs of the same company, i.e., MXL.
We are of the view that the adjudicating officer has erroneously imposed penalty on the appellant for the alleged offence under Section 8(3), 8(4) and 68 of the FERA, 1973 which order was erroneously affirmed both by the Appellate Tribunal and the High Court.
Appeal deserves to be allowed, the judgments of the High Court as well as those of the adjudicating officer and the Appellate Tribunal are set aside.
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2020 (8) TMI 30 - DELHI HIGH COURT
Permission for Direct Investment in certain cases - direct investment in joint venture or wholly owned subsidiary outside India - application the petitioner seeks permission for remission of USD 54.99 Million on or before 31st July, 2020 - HELD THAT:- What prima facie appears is that based on a communication written by Directorate of Enforcement containing cryptic information the RBI/respondent has chosen to withhold permission to the petitioner. The discretion under clause 9 of the abovenoted Regulations has to be exercised by RBI the respondent based on cogent facts and materials and not at the mere directions of Directorate of Enforcement. It was for the respondent/RBI to exercise its discretion in the facts and circumstances of the case keeping in view its own permissions given and subsequent facts and events that may have taken place after the permission was given. The discretion has to be exercised by RBI. The same cannot be delegated to the Enforcement Directorate. The impugned orders is also a non speaking order.
Petitioner has made out a prima facie case. The interim directions as stated in the order are reiterated.
Pass the following directions:-
The respondent shall permit the petitioner to transmit the sum of 54.99 million USD forthwith before 31.07.2020 as has been prayed for. This permission is however subject to the following:
(i) The petitioner shall furnish an undertaking from the Board of Directors that if for some reason this court passes a direction to the petitioner to deposit the said remitted amount amounting to 55 million USD, the petitioner shall forthwith deposit the same in court.
(ii)The petitioner shall give an undertaking that it has unencumbered assets worth 60 million USD or above and that the petitioner shall not sell, alienate or transfer or encumber these assets without prior permission of this Court.
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2020 (8) TMI 25 - DELHI HIGH COURT
Permission for Direct Investment in certain cases - on the saying of the concerned Enforcement Directorate, permission is being refused to the petitioner - HELD THAT:- In case an Indian party does not satisfy the eligibility norms of Regulation 6 then it may apply for RBI for approval. It is Regulation 6 which states that permission cannot be given in case the investigations are pending by the Law Enforcement agencies. Regulation 9 does not provide any such stipulation. Hence, prima facie the petitioner was correct in having approached RBI under Regulation 9.
Counsel for RBI has pointed out to some inquiry initiated recently as mentioned in communication dated 14.08.2019 by Enforcement Directorate. The petitioner refutes this. We cannot help noticing that the corporate guarantee and the loans have prima facie been taken with the prior permission of RBI. It would hardly be appropriate for the RBI to now let the petitioner go in default and dishonour its corporate guarantee because some investigation proceedings are pending by law enforcement agencies which appears to have been pending since 2015. In fact, as noted above while these proceedings were pending as late as in 2018, RBI has given permission to the petitioner. The petitioner has made a prima facie case.
Necessary permission for transmission of 90 million USD is not granted, as sought for, it is manifest that irreparable loss and injury would be caused to the petitioners as their credit rating would get downgraded.
Pass the following directions:-
The respondent shall permit the petitioner to transmit the sum of 75 million USD forthwith, the respondent will also permit the petitioner to transmit another sum of 15 million USD by 30.06.2020 as has been prayed for. This permission is however subject to the following:
(i) The petitioner shall furnish an undertaking from the Board of Directors that if for some reason this court passes a direction to the petitioner to deposit the said remitted amount amounting to 90 million USD, the petitioner shall forthwith deposit the same in court.
(ii) The petitioner shall give an undertaking that it has unencumbered assets worth 100 million USD or above and that the petitioner shall not sell, alienate or transfer or encumber these assets till the next date of hearing.
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2020 (4) TMI 417 - MADRAS HIGH COURT
Offence under FERA - Economic Offence cases - failure to realize the respective full export proceeds of the goods within the stipulated period - Transaction in clandestine manner - Whether opportunity notice as contemplated under the proviso to Section 61 (2) (ii) of FERA has been issued to A-1 to A-3? - Whether prior permission as mandated u/s 18 (2) of FERA has been obtained by A-1 to A-3 from the Reserve Bank of India;? - judgment of acquittal recorded by the trial court - HELD THAT:- This Court has no hesitation in holding that even non-issuance of opportunity notice as contemplated u/s 61 (2) (ii) of FERA will not vitiate the case. However, in the case on hand, Ex.P-41, opportunity notice as contemplated u/s 61 (2) (ii) of FERA has been issued to the accused. In such circumstances, the finding of the trial court that no opportunity notice has been issued to the accused is not only against the materials available on record, but also not in line with the law laid down by this Court and, accordingly, the said finding of the trial court is liable to be interfered with.
Insofar as the issue relating to contravention of Section 18 (3) of FERA by A-4 to A-6 is concerned A-4 to A-6 not only gave their quotas to A-1 to A-3 for being used, but have also jointly signed the declaration and that A-4 and A-5 have also given letter to their bankers to credit the realisation of the export proceeds in the account of A-1. That being the undisputed case, it is not now open to A-4 to A-6 to contend that they have not contravened the provisions of Section 18 (3) of FERA. Though it is not A-4 to A-6, who have sold the goods, but have only given their quotas to A-1 to A-3, however, A-6 being a joint declarant, a duty is cast upon A-4 to A-6 to see that all reasonable steps have been taken to receive or recover the payment for the goods sold and in the absence of following the provisions by taking the necessary steps to recover the export proceeds, it is to be presumed that A-4 to A-6 have contravened the provisions of Sections 18 (2) and (3) of the Act. The quota used by A-1 to A-3 is that of A-4 to A-6 and it is the imperative duty of A-4 to A-6 to see that the provisions of FERA are complied with in letter and spirit. By just giving the quota to A-1 to A-3, A-4 to A-6 cannot shirk their responsibility and take a turn and say that since they are not the exporters and that the sale proceeds does not pertain to them, they have not contravened the provisions of Section 18 (3) more so, when A-6 is the joint declarant in the GR Forms along with A-1. Losing sight of the above materials, the finding recorded by the trial court is not only illegal, but is also perverse, which requires interference.
Once this Court comes to the conclusion that the findings recorded by the trial court are illegal and perverse, then there is no legal bar for this Court to interfere with the said acquittal, in the light of the decisions aforesaid. Accordingly, this Court is of the considered view that the findings recorded by the trial court are illegal and perverse and is against the materials available on record and in the above circumstances, this Court is left with no other option, than to overturn the verdict of acquittal recorded by the trial court and convict the accused.
Though minimum sentence has been prescribed for the offence under Section 18, however, this Court, after taking into consideration the submissions advanced on behalf of the accused, and also considering their age and also the fact that the offence was committed during the period 2008-2009, and that almost a decade has passed since the commission of the offence, is of the considered view that the accused could be sentenced to a period of one day to be undergone from the time of sitting of this Court till the raising of this Court along with imposition of fine.
Accordingly, this appeal is allowed setting aside the acquittal recorded by the trial court and instead the accused/respondents herein are found guilty of the charges framed against them and they are hereby convicted and sentenced to undergo simple imprisonment for a period of one day before this Court, which is to be undergone on 12.02.2020 from the time of the sitting of this Court till the raising of this Court on the said day. Each of the accused is directed to pay a fine of ₹ 1,00,000/- (Rupees One Lakh only) by way of demand draft in favour of the Enforcement Directorate before 12/02/2020.
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2020 (3) TMI 1103 - SUPREME COURT
Organisation of a political nature as barred from receiving foreign contributions - Sections 5 (1) and 5 (4) of the Foreign Contribution (Regulation) Act, 2010 and Rules 3 (i), 3 (v) and 3 (vi) of the Foreign Contribution (Regulation) Rules, 2011 as violative of Articles 14, 19 (1) (a), 19 (1) (c) and 21 of the Constitution of India - Guidelines for declaration of an organisation to be an organisation of a political nature not being a political party are found in Rule 3 of the Rules - principal challenge of the Appellant-organisation to Section 5 (1) of the Act is on the ground that the terms ‘activity, ideology and programme’ are vague and have not been defined in the Act which result in conferring unbridled and unfettered power on the executive. Therefore, the Appellant-organisation contended that Section 5 (1) is violative of Article 14 of the Constitution. Section 5 (4) is also challenged on the ground that the authority to whom a representation should be made has not been specified and it is not clear whether the authority would be an independent authority or the Central Government itself
HELD THAT:- Where the provisions of a statute are vague and ambiguous and it is possible to gather the intention of the legislature from the object of the statute, the context in which the provisions occur and purpose for which it is made, the doctrine of “reading down” can be applied - DTC v. Mazdoor Congress [1990 (9) TMI 334 - SUPREME COURT] . To save Rule 3(v) from being declared as unconstitutional, the Court can apply the doctrine of “reading down”.
A balance has to be drawn between the object that is sought to be achieved by the legislation and the rights of the voluntary organisations to have access to foreign funds. The purpose for which the statute prevents organisations of a political nature from receiving foreign funds is to ensure that the administration is not influenced by foreign funds. Prohibition from receiving foreign aid, either directly or indirectly, by those who are involved in active politics is to ensure that the values of a sovereign democratic republic are protected. On the other hand, such of those voluntary organisations which have absolutely no connection with either party politics or active politics cannot be denied access to foreign contributions. Therefore, such of those organisations which are working for the social and economic welfare of the society cannot be brought within the purview of the Act or the Rules by enlarging the scope of the term ‘political interests’. We are of the opinion that the expression ‘political interests’ in Rule 3 (v) has to be construed to be in connection with active politics or party politics.
Any organisation which habitually engages itself in or employs common methods of political action like 'bandh' or 'hartal', 'rasta roko', 'rail roko' or 'jail bharo' in support of public causes can also be declared as an organisation of political nature, according to the guideline prescribed in Rule 3 (vi). Support to public causes by resorting to legitimate means of dissent like bandh, hartal etc. cannot deprive an organisation of its legitimate right of receiving foreign contribution. It is clear from the provision itself that bandh, hartal, rasta roko etc., are treated as common methods of political action. Any organisation which supports the cause of a group of citizens agitating for their rights without a political goal or objective cannot be penalized by being declared as an organisation of a political nature. To save this provision from being declared as unconstitutional, we hold that it is only those organisations which have connection with active politics or take part in party politics, that are covered by Rule 3 (vi). To make it clear, such of those organisations which are not involved in active politics or party politics do not fall within the purview of Rule 3 (vi). We make it clear that organisations used for channeling foreign funds by political parties cannot escape the rigour of the Act provided there is concrete material. In that event, the Central Government shall follow the procedure prescribed in the Act and Rules strictly before depriving such organisation the right to receive foreign contributions.
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2020 (3) TMI 1102 - SUPREME COURT
Violation of provisions of Section 10(6) of the FEMA Act - Responsibility of Authorised person - goods had arrived in India, but the Company failed to submit Bill of Entry and did not take delivery of the goods - goods not released and as such kept in bonded warehouse - defence of the appellant that he could not be made responsible for the stated contravention. For, he became the Managing Director of the Company much later i.e. on 22.10.2001 - HELD THAT:- In the present case, the finding of fact is that the import of goods for which the foreign exchange was procured and remitted was not completed as the Bill of Entry remained to be submitted and the goods were kept in the bonded warehouse and the Company took no steps to clear the same. As a result, Section 10(6) of the FEMA Act is clearly attracted being a case of not using the procured foreign exchange for completing the import procedure. It is also possible to take the view that the Company should have taken steps to surrender the foreign exchange to the authorised person within the specified time as provided in Regulation 6 of the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 (for short, “the FEMA Regulations”) issued by the Reserve Bank of India
Contravention referred to in Section 10(6) of the FEMA Act is a continuing actionable offence. If so, the Company and the persons managing the affairs of the Company remain liable to take corrective measures in right earnest. Considering the admitted fact that the appellant took over the management of the Company on 22.10.2001 and was fully alive to the default committed by the Company, yet failed to take corrective steps in right earnest. Notably, being conscious of such contravention, the appellant had sought indulgence of the authorities for more time.
Appellant cannot now be heard to contend that no liability could be fastened on him individually. Indeed, regulation 6 of the FEMA Regulations provides for the period within which the foreign exchange ought to be surrendered if the Company was not wanting to take delivery of the goods imported. That, however, does not mean that the contravention ceased to exist beyond the specified period. On the other hand, after the specified period as predicated in regulation 6 had expired, it would be a case of deemed contravention until rectified.
It is not the case of the appellant that he is not an officer or a person in charge of and responsible to the Company for the conduct of the business of the Company, as well as, the Company on or after 22.10.2001. Considering the fact that the appellant admittedly became aware of the contravention yet failed to take corrective measures until the action to impose penalty for such contravention was initiated, he cannot be permitted to invoke the only defence available in terms of proviso to subSection (1) of Section 42 of the FEMA Act that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention. In the reply filed to the show-cause notice by the appellant, no such specific plea has been taken.
We hold that no error has been committed by the adjudicating authority in finding that the appellant was also liable to be proceeded with for the contravention by the Company of which he became the Managing Director and for penalty therefor as prescribed for the contravention of Section 10(6) read with Sections 46 and 47 of the FEMA Act read with paragraphs A-10 and A-11 (Current Account Transaction) of the Foreign Exchange Manual 200304. The first appellate authority and the High Court justly affirmed the view so taken by the adjudicating authority.
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2020 (2) TMI 1366 - KARNATAKA HIGH COURT
Preventive detention - Powers in relation to absconding persons - COFEPOSA Act - delay in detaining the detenu - whether the detenu is absconding? - HELD THAT:- Ground is answered by the Learned Government Advocate to contend that the appropriate Government has not taken a decision as to whether the detenu is absconding or not. We are of the view that such an explanation by the State is unacceptable. After the issuance of an order of preventive detention the detenu requires to be arrested forthwith. If not, the procedure under Section 7 of the COFEPOSA Act requires to be complied with. They have failed to do so. The contention of the Learned Government Advocate runs contrary to the facts of the case. Therefore, such a contention cannot be accepted.
The Hon’ble Supreme Court in the Judgment in the case of Manju Ramesh Nahar v. Union of India and Others [1999 (3) TMI 658 - SUPREME COURT] have clearly stated that when the respondents have not furnished the information in detail of any steps to execute the order of preventive detention, the detention itself becomes illegal. That if persons who are responsible for execution of the order sleep over the order and do not execute the same, it would reflect upon the satisfaction of the detaining authority and would be exhibitive of the fact that the immediate necessity of passing that order was wholly artificial or non-existent. The same set of facts are present herein also. Except narrating the various steps taken by him to go to the house of the detenu and meet his wife etc., there is nothing tangible that has been done by the State.
The case relied upon by the Learned Government Advocate in the case of Vinod Chawla v. Union of India and Others [2006 (8) TMI 521 - SUPREME COURT] in our considered view, runs contrary to the interest of the State - contention with regard to the delay in detaining the detenu cannot be accepted. However, in the instant case, the same has not happened. No effort is made by the State under Section 7 of the COFEPOSA Act. There is no publication or proclamation. Therefore, in the absence of complying with the provisions of Section 7 of the Act, the further detention of the detenu becomes illegal.
In this case nothing seems to have been done. The provisions of Section 7 have not been followed. There is no effort made by the State. Even the reasoning assigned by them cannot be accepted. It cannot be said that there was any effort by the State in making any arrest. The contention of the Learned Government Advocate that the State has to be satisfied that he is absconding cannot be accepted, especially in view of the fact that he was arrested six months after the order of detention. Hence, the petition requires to be allowed. Under these circumstances, no further contentions are advanced by the petitioner’s Counsel.
Writ Petition Habeas Corpus is allowed. The further detention of the detenu is held to be illegal. The detenu directed to be released from custody forthwith, if he is not required in any other case/s.
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2020 (1) TMI 1601 - SUPREME COURT
Appellate authority for deciding the appeals filed after repeal of FERA against the order passed under Section 51 of FERA - Appellate forum for deciding the appeals arising out of the order passed under Section 51 of FERA - HELD THAT:- Learned Counsel for the parties are ad idem on the aspect that the issue is no more res integra in view of the judgment in Union of India v. Premier Ltd. [2019 (1) TMI 1502 - SUPREME COURT] which has answered the question in favour of the appellant before us by opining that the appellate forum for deciding the appeals arising out of the order passed under Section 51 of FERA whether filed prior to 1-6-2000 or filed after 1-6-2000 must be the same i.e. Appellate Tribunal under FEMA.
The impugned order is set aside and the appeal is restored to the Tribunal.
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2020 (1) TMI 544 - ATFEMA
Contravention of FEMA - Investment in three step-down subsidiaries through Wholly Owned Subsidiary (WOS) without the permission of the RBI - Penalty imposed - HELD THAT:- As provided that if any person contravened any provision of this act or contravened any rules, regulation, notification, direction or order issued in exercise of the powers under this Act be liable to penalty upto thrice the sum involved in such contravention where such amount is quantifiable. In the present case the sum involved are quantifiable.
During the course of argument the learned counsel for the appellants submitted, on query by the Bench, submitted that more than six crores of INR were invested in the step-down subsidiaries. If it is so the imposition of ₹ 70 lakhs on the appellant company and ₹ 20 lakhs on the Managing Director is not disproportionate. In my view the Adjudicating Authority has taken a lenient view and has imposed penalty lessor than the proportionate penalty. In the present fact and circumstances of the case the judgments stated by the appellant is not helpful to the case of the appellant.
There is no illegality in the impugned order passed by the Special Director, (Appeals).There are contravention of the provisions of section 6(3)(a) of the FEMA and Regulations 5, 6 & 13. The Adjudicating Authority has also rightly held that Mr. Taurani has violated the aforesaid provisions in terms of Section 42(1) of FEMA.
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2020 (1) TMI 405 - GUJARAT HIGH COURT
Compounding of contravention of [Regulation 7] of FEMA - Procedure for compounding - HELD THAT:- When the information is brought to the notice of the RBI, before remitting the case to the appropriate adjudicating authority under the amended proviso, exercise of taking decision under sub-rule (2), does not get diluted in any manner. It is open for the compounding authority, after considering the objections received from the Enforcement Directorate and affording an opportunity of hearing, to take a decision to remit the case to the appropriate adjudicating authority so that requirement of sub-rule (2) of Rule 8 is complied with fully.
In the instant case, merely coming into existence of the proviso will not render requirement of sub-rule (2) of Rule 8 nugatory. The proviso is in addition to sub-rule (2) and has to be read through sub-rule (2) and not otherwise as canvassed by Learned Advocate for the respondents, that is to say what is provided under sub-rule (2), cannot be read through the amended proviso to sub-rule (2) under the subsequent notification dated 20-2-2017.
The Court has perused the communications of the Enforcement Directorate which are addressed to the Special Director, Directorate of Enforcement, Western Region, Mumbai, which refer to the proceedings of justification to the export obligation by the petitioner regarding cut and polished diamond under three separate purchase contracts.
As the Court is not entering into the merits of the impugned decision, no further reference is made to such communication, leaving it upon respondent No. 2, in exercise of powers under sub-rules (1) and (2) to take a decision after affording an opportunity of hearing to the petitioner to contend that the so called proceedings of the Enforcement Directorate are not pertaining to the transaction in question. After hearing the petitioner, it is open for respondent No. 3 to take a decision in accordance with law.
The impugned communication dated 24-5-2017 is set aside accordingly. Respondent No. 3 is directed to take a fresh decision in accordance with law, particularly follow requirement of sub-rule (2) of Rule 8 of the Rules. The petition stands allowed to the aforesaid extent. Rule is made absolute.
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