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FEMA - Case Laws
Showing 41 to 60 of 854 Records
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2023 (2) TMI 16
FERA Proceedings - jurisdiction of Special Director of Enforcement - Transaction against exchange control regulations - penalties payable by the petitioners - proceedings were initiated for violation of the provisions of FERA and when the FERA was in force - alternative remedy - Reserve Bank of India (ROB) provided an information to the Enforcement Directorate to the effect that the bank for foreign trade of the USSR had transferred non-convertible rupee funds into convertible Vostro accounts of Bank of Ireland, UK with the IOB, Madras and in turn, the IOB had transferred about rupees four crores from this account to London - HELD THAT:- In the instant case, on going through the materials placed before us and after carefully considering the order passed by the Special Director of Enforcement, we find that we have to necessarily deal with a lot of documents and get into disputed questions of fact. To avoid such a scenario, the enactment itself provides for further remedies under Section 19 of FEMA before the Appellate Tribunal and thereafter, under Section 35 of the Act, by way of filing a further Appeal before the High Court against the order passed by the Appellate Tribunal. These remedies have been provided to enable an aggrieved person to contest the order passed by the Adjudicating Authority, both on facts and on law. These appellate remedies cannot be bypassed and the doors of the High Court cannot be knocked straight away under Article 226 of the Constitution of India.
In the present case, there is no lack of jurisdiction for the Special Director of Enforcement to pass the impugned order, there is no violation of principles of natural justice and this Court does not find any special circumstances to disregard the alternative remedy and to decide the dispute in this Writ Petition. Apart from these reasons, we have already held that the case requires determination of disputed facts based on documents and it will be fit and proper if this exercise is done before the Appellate Tribunal.
We are inclined to relegate the petitioners to the Appellate Tribunal to work out their remedy in accordance with law and it will be left open to the petitioners to raise all the grounds before the Appellate Tribunal.
The petitioners are permitted to file appeal against the order passed by the Special Director of Enforcement in proceedings within a period of 45 days from the date of the receipt of copy of this order. When these Writ Petitions were entertained, interim orders were passed and thereby, the operation of the order of the Special Director of Enforcement dated 12.03.2009 was stayed. Consequently, the penalty amount was not recovered from the petitioners during the pendency of the Writ Petitions. We are inclined to extend this interim protection till the appeal is filed before the Appellate Tribunal.
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2023 (1) TMI 1105
Foreign investment in India - certain ‘procedural’ or ‘technical’ contraventions under FEMA - Compounding of offense - Online i.e., website-based and mobile application games constitute ‘gambling’ as understood in law in this country - delays in the filings of the prescribed forms and reporting of the inward remittances and also delays in the allotment of shares - Petitioner received foreign remittances at diverse periods between 2006 and 2012 and it issued equity instruments i.e., shares, to certain non-resident investors, the Petitioner had committed certain ‘procedural’ or ‘technical’ contraventions under FEMA - whether, for the relevant period, it can be said that the business activity of the Petitioner was illicit, prohibited by law, or illegal such that it would be disentitled to receive foreign investment at all? - HELD THAT:- actual nature of the activity. As we have seen the relevant period is 2006 to 2012. What the DPIIT seems to have done is to have visited the Petitioner’s website at rummycircle.com and found that there was an offering called Ultimate Teen Patti and another called Call it Right. The Affidavit clearly says that these were noted on the Petitioner’s website. The DPIIT asked for no explanation from the Petitioner. It sought no clarification. It sought no explanation as to the nature of these games or offerings. There is nothing to indicate that the DPIIT, in response to the Petitioner’s applications, called on the Petitioner to explain when these online games were first offered, how they were conducted, what they involved or any other material particulars. The Affidavit and the letter to the ED from the DPIIT clearly show that the DPIIT proceeded only on the basis of the name, i.e., the label attached to the name; in another manner of speaking, because ‘Teen Patti’, therefore gambling.
Predominant element of the activity - skill or chance - determines the character of the game. But to constitute ‘gambling’, both conditions must be met:
(i) it must be predominantly a game of chance, and
(ii) it must be played for reward.
DPIIT does not show on Affidavit or otherwise that there is any element of reward in either the so-called Ultimate Teen Patti or the Call it Right game. It does not show that it asked for such a clarification at all. ‘Terms of Service’ on the Petitioner’s website, quoted above, that there was no reward at all. We have therefore a situation where there is a categorical statement made by the Petitioner on its own that none of its activities involved ‘gambling’, as understood in Indian jurisprudence, that is a game of chance with no element of skill, for any gain or reward.
If we view it like this, and given the material, we do not see any other way to it, the mere positioning of these two games (that too after 2012) on the Petitioner’s website cannot render illicit or illegal any activity on the Petitioner’s website or mobile platforms, let alone for the earlier reporting period in question.
This is the factual and legal position as it emerges from the record before us. We must clarify that whether it is for a past period or for an ongoing or future period, it is undoubtedly necessary that the Petitioner must remain clear of any illicit or prohibited gambling activity, whatever the platform. If this is illegal in India, it does not become legitimate merely because it is online or because foreign investors have put money into it. We have the statement made across the Bar and which we will of course have to accept as an undertaking to the Court that at no point will the Petitioner’s activities involve gambling, so long as it is prohibited by our law. The mere fact that there is a game of chance on the website does not in itself make the activity gambling unless there is an accompanying reward or promise of a reward.
It is also clear that for any further foreign investments or FDI equity allotments that the Petitioner makes, it will necessarily have to comply with all applicable statutes. It may indeed have to be subjected to scrutiny yet again. We do not exempt the Petitioner from any of these requirements.
We also make direct the RBI in view of our judgment today to consider the application by the Petitioner for compounding the non-compliances for the period 2006 to 2012 noted above.
At this stage, Mr Shenoy states that a fresh application will be required. The Petitioner will submit that within two weeks. We proceed on the basis that this application will not be confronted with a problem of delay in filing. If there is any such delay, we hereby condone it.
The Fresh application will be decided by the RBI as expeditiously as possible and preferably in four weeks from the date of application. The only reason for specifying a period is that the compounding pertains to 2006 to 2012 and the Petition itself has been pending before us for much too long.
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2023 (1) TMI 944
Levy of penalty - Petitioners having opened the FCRA account belatedly - Form FC-4 required a FCRA account as on 31st March of the end of financial year - scope of Foreign Contribution Regulation (Amendment) Act, 2020 - HELD THAT:- A perusal of the said form at serial no.7 requires FCRA account says that receipt of foreign contribution “as on 31st March of the year ending” has to be provided and the bank account has to be in the SBI, Sansad Marg branch. Since the Petitioner No.1 opened its account in August, 2021 and in any case, as on 31st March, 2020, the Foreign Contribution Regulation (Amendment) Act, 2020, had not come into effect, there appears to be some justification in the Petitioners’ case.
Petitioner No.1 having opened its FCRA account in August, 2021 is, accordingly, permitted to fill up the said details of its FCRA account in serial no.7 of the Form FC – 4 and submit the same.
No coercive steps shall be taken against the Petitioners for having opened the FCRA account belatedly, inasmuch as it is the case of the Petitioners is that no foreign contribution has been received by them in the FY 2019-2020 and FY 2020-21.
No penalty shall be imposed upon the Petitioners if the returns for FY 2019-2020 and FY 2020-21 are filed within a period of one month. No further orders are called for by filling in the details of the bank account opened in August 2021, in SBI, Sansad Marg branch.
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2023 (1) TMI 943
Maintainability of writ petition before the Chennai High Court - Availability of alternative remedy - Validity of adjudication order passed by the Special Director of Enforcement in proceeding imposing penalty for the contravention of Section 64(2) of the Foreign Exchange Regulation Act - HELD THAT:- In the instant case, on going through the materials placed before us and after carefully considering the order passed by the Special Director of Enforcement, we find that we have to necessarily deal with a lot of documents and get into disputed questions of fact. To avoid such a scenario, the enactment itself provides for further remedies under Section 19 of FEMA before the Appellate Tribunal and thereafter, under Section 35 of the Act, by way of filing a further Appeal before the High Court against the order passed by the Appellate Tribunal.
These remedies have been provided to enable an aggrieved person to contest the order passed by the adjudicating authority, both on facts and on law. These appellate remedies cannot be bypassed and the doors of the High Court cannot be knocked straight away under Article 226 of the Constitution of India.
Where the High Court has entertained a Writ Petition and it is pending for a long time, the Writ Petition should not be thrown out on the ground of alternative remedy. However, it is not an absolute rule and there are appropriate cases where the parties will have to be directed to avail an efficacious alternative remedy of appeal. That course can be adopted at any stage and even at the stage of Writ Appeal.
In the present case, there is no lack of jurisdiction for the Special Director of Enforcement to pass the impugned order, there is no violation of principles of natural justice and this Court does not find any special circumstances to disregard the alternative remedy and to decide the dispute in this Writ Petition. Apart from these reasons, we have already held that the case requires determination of disputed facts based on documents and it will be fit and proper if this exercise is done before the Appellate Tribunal.
Entire cause of action has taken place at Mumbai and the order has also been passed by the Special Director of Enforcement at Mumbai. Just because the IOB has a Treasury(Foreign) Department at Chennai, that by itself will not become a part of the cause of action. This is yet another ground on which we are not inclined to entertain the present Writ Petition.
We are not inclined to go into the merits of this case and deal with various factual issues that were raised on either side.
The petitioners are permitted to file appeal against the order passed by the Special Director of Enforcement within a period of 45 days from the date of the receipt of copy of this order.
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2023 (1) TMI 597
Prohibition to accept foreign contribution - misuse of the Foreign Contribution (Regulation) Act [FCRA ] by the political party - Association for Democratic Reforms seeking directions to constitute an independent tribunal or committee to oversee the enforcement of the Foreign Contribution (Regulation) Act, 2010 (‘FCRA Act’) - Petitioners have stated that that there have been several instances of political parties and legislators accepting contributions and hospitality from foreign sources which is, prima facie, in violation of the FCRA - HELD THAT:- The Petitioner has failed to place on record any data indicating the number of political parties which have availed of foreign contribution, and have failed to be penalised under the FCRA. The apprehension of the Petitioner that the FCRA may be misused for oblique motives is a bald averment and is entirely unfounded. Courts cannot pass a direction only on hypothesis. Nothing has been placed on record to show that the FCRA is being used selectively against NGOs and other independent organisations as well.
The entire case of the Petitioner is premised on the possibility of a political party, who is also at the helm of affairs at the Centre, abusing the provisions of the FCRA to suppress dissent and receive foreign contributions in its own favour. The instant Writ Petition is entirely built on surmises and conjectures.
There exists a basic difference between legislative and judicial functions, elucidated by the basic structure doctrine, which states that while the legislature makes laws, the executive enforces and administers it, and the judiciary tests the validity of legislation formulated by the Legislature.
It has been laid down in a catena of judgments the courts cannot direct the legislature to frame or enact a law and in a particular manner. It cannot amend a statute or add provisions to the statute, as that too would be tantamount to judicial legislation. The role of the judiciary is initiated only after a law is enacted to test the legality of a statue on the known principles of judicial review
Setting up of such Tribunals/Authorities/Committee is purely a policy decision, taken by the Legislature. A direction for setting up a Committee or Tribunal would effectively be an amendment of the FCRA, which is beyond the scope of judicial review by this Court. Hence, an attempt by a judicial body to set up a tribunal is directly in the teeth of the doctrine of separation of powers.
Recently, the Hon’ble Supreme Court vide Judgment in John Paily v. The State of Kerala,[2021 (4) TMI 1349 - SUPREME COURT] has held that Courts do not possess the power to set up an adjudicatory committee or a tribunal by way of issuing a writ of mandamus. In light of this, the direction sought by the Petitioner to set up a Committee or Tribunal to oversee the functioning of the FCRA is unsustainable. This Court cannot direct setting up of a Committee or a Tribunal, simply due to the possibility of misuse of the FCRA.
The entire case of the Petitioner rests on the possibility of misuse of the FCRA by the political party at the helm of affairs. This misuse, it is apprehended, may be directed towards hindering the independence of judicial officers, targeting NGOs and stifling dissent. Further, the Petitioner apprehends that due to a conflict of interest, the FCRA may not be effective to curb political parties from accepting foreign contributions. The mere possibility that a statute will not be administered adequately is not ground for the statute to be invalidated or for this Court to supplement its wisdom with the Legislature’s. To set up a committee or tribunal is a purely policy decision. The legislature alone has the power to set up a tribunal or committee, under the requisite statute, to adjudicate disputes arising from it. If the prayer sought by the Petitioner is allowed, it would essentially be an exercise in judicial legislation, and would be beyond the power of judicial review accorded to this Court. Due to the aforementioned reasons, this Court is not inclined to allow the present petition. Writ Petition is dismissed,
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2022 (12) TMI 1244
Offence under FERA - sentence on economic offence - petitioner was found involved in huge transaction of foreign exchange and was dealing in prohibited items i.e. gold biscuits of foreign origin - judgment of enhancement of sentence - order of sentence holding petitioner guilty of offence u/s 8(1) & 8(2) of FERA and sentencing him to undergo imprisonment for a period of six months and to pay a fine of Rs.5,000/- and in default of payment of fine, to further undergo R.I. for a period of three months - appeal filed by the complainant for enhancement of the sentence was allowed and the petitioner was directed to undergo R.I. for a period of two years and to pay a fine of Rs.5,000/-. In default of payment of fine, to further undergo R.I. for a period of two months under Section 56 of FERA.
HELD THAT:- Present revision petition is partly allowed to the extent that impugned judgment passed by the lower appellate Court, enhancing six months R.I. and fine of Rs.5,000/-, as awarded by the trial Court, to 02 years R.I. and to pay a fine of Rs.5,000/- and in default thereof, to further undergo R.I. for two months, is set aside and that of the trial Court is restored.
As the fine has already been paid and the petitioner, as per the custody certificate, has already undergone 07 months of sentence i.e. over and above 06 months R.I. awarded by the trial Court, no further action is called for, as he has already undergone the entire sentence.
With the aforesaid modifications, present revision petition is disposed of.
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2022 (12) TMI 1199
This Court jurisdiction to entertain the execution petition of a foreign decree - Summary judgement - execution proceeding emanates from the letter which respondent/DH demanded repayment from the appellant/JD the amount paid to the lender – bank as Guarantor of the loan obtained by the appellant/JD; which was refuted by the appellant/JD - HELD THAT:- Upon going through decision in Renusagar Power Co. Ltd. Vs. General Electric Co [1993 (10) TMI 232 - SUPREME COURT] and applying it to the facts of the present case, we find that no doubt in view of said decision ex post facto permission can be obtained from the RBI to remit the funds, however, when the decree itself is found to be vitiated, being against the prescribed procedure of law recognized in India, the occasion for obtaining ex post facto permission from RBI by the decree holder in respect of awarded amount, does not arise at all. We have already observed that the decree passed by the Court in UK is without any merit and abrogative. Also, in the present case the respondent/DH was the Guarantor to the lender located in a foreign country. We also find that once a conditional permission has been granted by the RBI, any claim beyond the said conditions is contrary to law.
A careful evaluation of afore-noted statements made on behalf of appellant/JD’s witness as well observations of the UK court shows that the pleas raised by both the sides are on triable issues. However, without granting an opportunity to leave to defend to appellant/JD, the UK court has passed the Summary Judgment, enforcement of which is sought in India.
It is an admitted position that on one hand appellant/JD filed its leave to defend and on the other, respondent /DH sought passing of Summary Judgment by the Court. It is also not disputed that at the time of passing of the impugned judgment and decree, leave to defend filed by the appellant/JD was not granted and it is on the basis of documents placed on record the Summary Judgment was passed.
In BL Kashyap v. JMS Steels and Power Corporation [2022 (1) TMI 1311 - SUPREME COURT] it has been held that while dealing with the application seeking leave to defend, the Court has not to proceed as if denying the leave is the rule and it is only to be granted in meritorious cases, rather the Court has to ensure that where triable issues are raised, leave to defend be granted and even the Court can grant conditional leave to defend.
This Court had specifically put a query to appellant/ JD, why it did not file an appeal before the UK Court? - The learned senior counsel appearing on behalf of appellant replied that when the respondent/DH sought a Summary Judgment from the Court at UK to get the decree enforced in India, that too without affording an opportunity to leave to defend to the appellant/JD, which is against the procedure followed under Indian Law, there was no ground to file an appeal against the said judgment in UK or in India. We find that since the foreign decree was not executable in India, in such circumstances there was no occasion for appellant/JD to file an appeal against that and it is only when its executions is sought in India, the appellant/JD has filed its objections.
The present case has not been filed under Order und 14 RSC and after passing of Default Judgment, respondent/DH sought Summary Judgment under Rule 24.2 of the UK Civil Procedure Rule, 1998, which is completely different than the other provisions of law and so, the decision in Navin Khilani [2007 (5) TMI 686 - DELHI HIGH COURT] is not applicable to the facts of the present case.
We find that the setting aside of default judgment and passing of summary judgment by the same court at UK, is not recognized under the prescribed procedure of law in this country. Moreover, the disputes between the parties are triable issues and denial of leave to defend to the appellant/JD is against the interest of justice.
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2022 (12) TMI 1110
Person aggrieved’ in section 17 of FEMA - deemed complainant - Whether appellant is not an aggrieved person? - Whether writ petitioner is not entitled for copy of the adjudication order as he was only an informer and he cannot be treated as complainant? - HELD THAT:- Perusal of the rules stated makes it clear that a complaint can be made only by a person authorised by a general or special order of the Central Government. Lis is between the the complainant and the person against whom allegations were made and ultimately adjudicated. As per the statutory provisions, by no stretch of imagination, appellant/petitioner can be termed as a complainant and consequentially entitled to a copy of the adjudicatory order.
Though Mr. S. Shyam, learned counsel for the appellant further submitted that he is personally aggrieved over the decision taken by the Adjudicating Authority and in the above circumstances, entitled to a copy of the order, we are not inclined to accept the said submission also, for the reason that an informer, to the Enforcement Directorate, cannot be said to be personally aggrieved over a decision taken by the Adjudicating Authority. In the light of the above discussion, we find no error or infirmity in the impugned judgment, warranting interference. Accordingly, writ appeal is dismissed.
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2022 (12) TMI 566
Offence under FEMA - vicarious liability of the persons responsible - Responsibility of Directors - accused person following alleged contravention by him of the provisions of the said Act, being the ‘Director’ of the company, along with the company and other co-accused persons, for alleged commission of such contraventions/offence - HELD THAT:- During all these time petitioner was a ‘Director’ of the accused company. He remained so till 2nd August, 1996, that is a date well within the statutory period of six months time. According to the scheme of this Act, he cannot relinquish his liability as regards the alleged contravention for this period at the time of and after export of the goods, till the time he remained as company’s ‘Director’ taking part in the affairs thereof, as suggested in the complaint, of course unless he rebuts the same with adequate materials.
Under the circumstances, it cannot be said that the allegations made against the petitioner in the complaint do not prima facie constitute any offence, show the involvement of the petitioner therein, or make out a case against him, or that it do not disclose any cognizable offence at all. It can also not be said that the allegations made in the FIR are only absurd and inherently improbable, or that there is no sufficient ground for proceeding against him. The factual aspects of the case as discussed above, would definitely discard any intention of malafide or malice of the complainant, who intends to proceed against the accused person on the basis of available materials against him, prima facie constituting an offence. This should not lead to quashing a proceedings initiated to unearth the truth. See BHAJAN LAL [1990 (11) TMI 386 - SUPREME COURT]
Petitioner though being designated or appointed in the accused company as a ‘Director’ , he was not entrusted with the management, affairs or policy of the same as part of his duty as a ‘Director’ -Company’s records and more so the specific averments in the complaint show otherwise. This, at one end, prima facie constitutes a contravention/offence and make out a case against him and at the other, duly complies with the statutory provision and dictum of the Hon’ble Supreme Court in N. Rangachari’s judgment (mentioned earlier). Hence this case shall not fall within the category of cases, where the power of this Court under section 482 Cr.P.C, 1973, may be exercised to prevent abuse of the process of the court or otherwise to secure the ends of justice. Contrarily, by following the ratio of the judgment of N. Harihara Krishnan vs. J. Thomas [2017 (9) TMI 1 - SUPREME COURT] it can be stated that taking cognizance of an offence by the court is one of the initial steps in the whole process. Upon existence of prima facie material, the process of the court should not be hampered.
Thus no merit in petitioner’s case, this revision is dismissed.
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2022 (12) TMI 15
Maintainability of appeal before High court - hierarchy of forums provided for the parties to redress their grievances - violation of the provisions of Section 4 of FEMA - shares as well as some immovable properties of the alleged contravener were attached - petioner driven to go before the Tribunal by invoking Section 37A(5) of the FEMA Act - HELD THAT:- The parties aggrieved against the order to be passed by the Tribunal can very well invoke the further appeal provision under Section 35 of the FEMA Act to prefer an appeal to the High Court. Therefore, instead of filing a second appeal, the petitioner has taken the route of filing the appeal by way of these two writ petitions, which is not acceptable.
Thus, the very remedy available to both the parties to go before the Appellate Tribunal would be unnecessarily lost, which would go against the very scheme of the Act, under which, the order to be passed by the Authorized Officer has to be approved by the Competent Authority and the order of the Competent Authority has to be evaluated by the Tribunal under Section 37A(5) of the FEMA Act, as against which, the aggrieved person can prefer an appeal before the High Court. This kind of hierarchy of forums provided for the parties to redress their grievances cannot be permitted to be omitted, which would result in loss of chance to the other party to invoke the appeal remedy before the other forum.
This Court has no hesitation to hold that, since the Tribunal has been functioning with the Chairman from 26.09.2022, the petitioner can prefer an appeal before the Tribunal against the impugned orders and in this regard, this Court feels that some reasonable time, i.e., 45 days, can be granted to the petitioner department to prefer an appeal before the Tribunal.
The learned Senior Counsel appearing for the contravener, on instructions, given an undertaking before this Court that, the alleged contravener would not encumber or meddle with the subject properties of the attachment orders, which are impugned herein.
Order - Since the petitioner department can very well file an appeal under Section 37A(5) of the FEMA Act before the Appellate Tribunal, both these writ petitions cannot be proceeded further by this Court to decide the issue on merits by invoking the extraordinary power under Article 226 of the Constitution of India. The petitioner department is granted liberty to prefer an appeal before the Tribunal under Section 37A(5) of the FEMA Act, within a period of 45 days from the date of receipt of a copy of this order, where it is open to the petitioner to seek for any interim order. Till such time, i.e, till the petitioner approaches the Tribunal, there shall be an interim protection to the effect that the alleged contravener shall not exploit the movable and immovable properties which are attached in the impugned orders
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2022 (11) TMI 1233
Offences committed under the repealed FERA - Appointment of Adjudicating Authority - Classes of officers of Enforcement - proper authorization of the ‘Adjudicating Officer’ - Scope of corresponding provisions of FEMA - Whether Mr. A.K.Bal (Respondent No.2) was specially empowered under Section 50 of FERA to be the Adjudicating Officer? - HELD THAT:- All offences committed under the repealed Act shall continue to be governed by the provisions of the repealed Act as if that Act had not been repealed. Anything done or any action taken or purported to have been taken or done under repealed Act shall, in so far as it is not inconsistent with the provisions of FEMA, be deemed to have been done or taken under the corresponding provisions of FEMA. When an Adjudicating Officer had been appointed before the repeal of FERA but, as could be seen from the Notification dated 1st June 2000 read with Office Order dated 20th November 2002, Mr. A. K. Bal had not been appointed before the repeal of FERA but has been appointed under the provisions of FEMA, therefore, this appointment in our view is not valid in any event to be appointed as an Adjudicating Officer under Section 50 of FERA.
Notably, Section 50 FERA refers to an officer of enforcement specifically empowered in this behalf by order of the Central Government. The Impugned Notification states that the Adjudicating Officer was deemed to have been empowered. A plain reading of Section 50 FERA shows that there must be a specific empowerment. A deemed empowerment is impermissible in law. The Impugned Notification is issued in continuation of earlier notification dated 10th July 2001 (appointing Mr. A.K. Bal as the Adjudicating Authority) and also bears reference to Section 49(5)(a) FEMA. It would be pertinent to point out that Section 49(5)(a) seeks to continue the actions under FERA (and not inconsistent with FEMA) under the corresponding provisions of FEMA and not vice versa. Besides this, there is nothing in FEMA authorizing Adjudicating Authority to issue notice for violations under any provision of FERA.
It is well settled that where a statute provides for a thing to be done in a particular manner, then it has to be done in that manner, and in no other manner. For the purpose of Section 49(3) FEMA, there has to be a proper authorization of the ‘Adjudicating Officer’ who issues the notice of contravention under the provisions of FERA. Only because an officer has been appointed for the purpose of acting in terms of the provisions of an act, the same would not by itself entitle an officer to discharge all or any of the functions of the Central Government, unless specifically authorized. In the circumstances, we will have to hold that Mr. A. K. Bal had no authority to issue the show cause notices and consequently no order based on the show cause notices could have been passed.
Whichever party has deposited any penalty or any amount pursuant to the show cause notices issued or the impugned order, the amounts to be refunded together with interest, if any, within 8 weeks from today.
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2022 (11) TMI 141
Appeal before the Appellate Tribunal - Appellate Tribunal was not functional in the absence of members having been appointed - Tribunal has become functional and the Court is informed that Members as well as the Chairperson have come to be appointed - As petitioner submits that it chooses not to pursue the appeal which is pending before the Tribunal subject to rights being reserved to agitate all questions in the pending writ petition. This, in the backdrop, as Mr. Ganesh would contend, of the fact that pleadings have been duly exchanged on the instant writ petition and the Division Bench has framed directions for the disposal of the writ petition itself.
In view of the aforesaid, let the petitioner, if so chosen and advised, withdraw the appeal which is pending before the Appellate Tribunal subject to rights being reserved to pursue and agitate all questions in the instant writ petition.
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2022 (9) TMI 1266
Offence under FEMA - Eligible charge against petitioner in SCN - no permission was given for repatriation of sale proceeds to person resident outside India and that acquisition and transfer of immovable property by her heirs residing outside India would be covered - petitioner has contravened the provisions of Section 6(3)(i) of FEMA read with Rule 8 of FEMA (Acquisition and Transfer of Immovable Property in India) Regulations 2000 (FEMA Regulations) and thereby petitioner has rendered itself liable to be proceeded against under Section 13(1) read with Section 42(1) of FEMA - HELD THAT:- Issuance of a show cause notice is not an empty formality. Its purpose is to give a reasonable opportunity to the affected persons to contend that they have not committed any breach. Proper opportunity should be given to the person likely to be affected by the order proposed to be made a notice of the action intended to be taken, inform him about the materials on the basis of which the appropriate authority proposes to take action and give a fair and reasonable opportunity to such person to represent his case and to correct or controvert the material sought to be relied upon against him.
It is essential for a show cause notice to indicate the precise scope of the notice and also to indicate the points on which the recipient of the show cause notice give a reply.
In our view, there is nothing in the show cause notice to give any indication as to what are the allegations to which petitioner should furnish a statutory explanation. In paragraph 9 of the show cause notice, it is stated that without obtaining the prior permission of RBI, petitioner has repatriated the sale proceeds to M/s Salvation Army but the provisions relied upon in the show cause notice by respondent no.2 has nothing to do with repatriation of any sale proceeds. Further, Regulation 8 of the said Regulation only provides ‘save as otherwise provided in the act or regulations no person resident outside India shall transfer any immovable property in India’. It does not refer to any acquisition.
As could be seen from the show cause notice itself the admitted position is Mrs. Meerabai Dawson held immovable property in India, which she inherited from her parents, who were resident in India. The Executors of the Will of Mrs. Meerabai Dawson only disposed the immovable property that she had inherited from her parents who were residents in India, and repatriated the sale proceeds to the beneficiaries of her Will. The beneficiaries did not transfer any property in India from respondent no.2 to allege breach of Regulation 8. Moreover, petitioner was, admittedly, only the power of attorney holder and legal counsel of the Executor’s of the Will of Mrs. Meerabai Dawson and therefore, cannot be held liable in the facts of the present case.
We are inclined to exercise our jurisdiction under Article 226 of the Constitution of India and quash and set aside the impugned show cause notice.
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2022 (9) TMI 856
Interpretation of statute - Compounding of offence for non-filing of the annual return by payment of penalty - delay in filing of the annual return - Validity of Notification bearing No.S.O. 1070(E) dated 26.04.2013 issued by the respondent u/s 41 of the Foreign Contribution (Regulation) Act, 2010 - whether impugned notification is ultra vires of the provisions of the FCR Act? - Whether the delay in filing of the returns is an offence punishable under the FCR Act? - HELD THAT:- Petitioner was required to furnish the annual returns in Form FC-6 along with its final accounts (income and expenditure statement, receipt and payment account and balance sheet) within nine months of the end of the relevant financial year. Therefore, the petitioner was required to file the annual return for the financial year ending on 31st March of any year on or before 31st December of that year.
There is no ambiguity that the petitioner was required to file the annual returns within the prescribed period in compliance with the provisions of the FCR Act.
It is not necessary that all offences be separately listed out in Chapter-VIII of the FCR Act. The plain language of Section 37 of the FCR Act clarifies that the punishment, as specified, would be applicable in case of noncompliance of any provision of the FCR Act for which no specific punishment is prescribed. Thus, violation of any provision of the FCR Act would attract punition, as specified.
The heading of a section of an enactment may be used as an aid for interpretation of that section but does not control the meaning or import of the section where the language of the section is free from ambiguity.
The contention that delay in filing of the annual return under the FCR Act is not an offence, is rejected. The question as noted in paragraph 2(b) is answered in the affirmative.
Composition of certain offences - challenge to the validity of the impugned notification - Section 41 of the FCR Act expressly provides that any offence, other than an offence, which is punishable by imprisonment only, made prior to institution of any prosecution be compounded for such sums as the Central Government may specify.
The impugned notification has been issued by the Central Government in exercise of powers under Section 41 of the FCR Act. It does not fall foul of any provision of the FCR Act. We are unable to accept that the impugned notification is ultra vires to the Constitution of India. It merely stipulates the terms on which given offences can be compounded.Question as noted in paragraph 2(a) is answered in the negative.
Whether the impugned order is sustainable? - Admittedly, the petitioner had failed to file the annual return within the time prescribed and thus, had failed to comply with the provisions of Section 18 of the FCR Act read with Rule 17 of the FCR Rules.
In terms of the impugned notification, the delay in filing of the annual return would be compounded by payment of penalty as stipulated therein. The tabular statement specifying the offences, the amount of penalty and the officer competent to compound the same, as set out in the impugned notification.
The obligation to file the annual return for the financial year 2010-11 had arisen on 01.05.2011 and the same was required to be filed before 31.12.2011. Failure to do so is failure to comply with the provisions of the FCR Act. This does not amount to imputing any act committed prior to the FCR Act coming into force as an offence under the said Act.
The impugned order to the extent it stipulates payment of penalty for the delay in filing the annual return for the financial year 2009-10, is set aside.The questions, as noted in paragraph 2(c) and 2(d), are answered accordingly.
Considering the mitigating circumstances, this Court also considers it apposite to grant the petitioner further four weeks’ time from today to deposit the penalty, as stipulated, for the financial years 2010-11 and 2011-12 along with the requisite application for compounding the offence.
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2022 (8) TMI 1107
Violation of the provisions of the FERA - proceedings to be initiated within a particular period provided under the Statute - As submitted authorized dealer, before permitting the deposits of foreign currency, was required to satisfy himself that the foreign currency is deposited by the NRI Account Holder himself; that the account holder is on a temporary visit to India; and that the account holder is still normally resident abroad - whether High Court has grossly erred in holding that it was for the first time that the stipulation regarding the deposits of foreign currency by the account holder himself, was expressly provided for by Circular dated 31st July 1995 and therefore the Circular dated 31st July 1995 could not have had a retrospective operation? -
HELD THAT:- We are of the view that the show causes notices issued in the year 2002, i.e., after a period of almost one decade from the date of the alleged transactions of 1992-1993, were not tenable in law.
It is a settled proposition of law that when the proceedings are required to be initiated within a particular period provided under the Statute, the same are required to be initiated within the said period. However, where no such period has been provided in the Statute, the authorities are required to initiate the said proceeding within a reasonable period. No doubt that what would be a reasonable period would depend upon the facts and circumstances of each case.
Admittedly, in the present cases, the alleged transactions had taken place during the financial years 1992 and 1993. Show cause notices for the said transactions were issued in the year 2002 and that too just before the sunset period of FERA was to expire, i.e., on 1st June 2002. We are therefore of the considered view that show cause notices and the proceedings continued thereunder are liable to be set aside on this short ground.
As per provisions of Rules 2, 3 and 4 of the said Rules every Banking Company to preserve records stated in Rule 2 for five years and eight years for records mentioned in Rule 3 respectively. No doubt that under Rule 4 of the said Rules, the RBI, having regard to the factors specified in subsection (1) of Section 35A, by an order in writing, is empowered to direct any banking company to preserve any of the books, accounts or other documents, etc. for a period longer than the period specified under the said Rules.
Undisputedly, no such order has been placed on record which required the respondents-Banks to preserve records concerning the transactions in question for a period longer than eight years.It could thus be seen that even under the said Rules, the Banks are required to preserve the record for five years and eight years respectively. On this ground also, permitting the show cause notices and the proceedings continued thereunder of the transactions which have taken place much prior to eight years would be unfair and unreasonable.
We find no error in the impugned judgments of the learned Single Judge as well as the Division Bench of the High Court of Delhi. The Civil Appeals as also the Criminal Appeals are therefore dismissed.
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2022 (8) TMI 151
Stay of recovery - whether any hearing can take place before the Tribunal qua the subject matters to be listed before the Tribunal even if these four members are appointed in the absence of the Chairman of the Tribunal. Learned ASG seeks some time to obtain instructions? - HELD THAT:- We had earlier also posed a query to learned ASG and pose it again as to why we should not pass an order directing stay of recovery proceedings in all matters before the Tribunal as the judicial remedy is before the Tribunal and if the Tribunal is not being constituted to hear the matter, which is resulting in unnecessary expenses to the litigants to approach the High Court and burden on the High Court to deal with those matters.
List on 02.08.2022.
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2022 (8) TMI 64
Offence under FEMA - cash money which was seized from the residence the husband of the petitioner No.1 and two other petitioners, who are the daughters, belonged to the petitioners - noticees referred therein were asked to give response to the same within 30 days from the date of receipt of the said notice as to why adjudication proceedings as contemplated under Section 16 read with Section 13 of FEMA, 1999 should not be held against them - HELD THAT:- Writ Court in exercise of its Constitutional writ jurisdiction under Article 226 of the Constitution should not investigate the ownership of such disputed amount of cash money seized from the possession of one of the noticees at Kolkata in course of search and seizure in question while petitioners are claiming the same as their own money.
It is well settled principle of law that High Court in exercise of its Constitutional writ jurisdiction under Article 226 of the Constitution of India should not investigate and adjudicate the title or ownership of any disputed immovable or movable properties and declare the ownership of the same in favour of one party.
Considering the facts and circumstances of the case and the submission of the parties and in view of the fact that this Writ Petition filed by the petitioners challenging the impugned show-cause notice and prayed for quashing of the same are by none of the noticees and noticees have not challenged the same which has been issued by the Enforcement Authority at Jaipur in Rajasthan and none of the noticees have filed this Writ Petition challenging the impugned adjudication proceedings in question arising out of the impugned search and seizure proceedings out of which impugned adjudication proceedings are pending at Chandigarh and in view of the fact that the highly disputed question of ownership of the seized cash amount in question is involved which is a part of the said pending adjudication proceeding at Chandigarh which the petitioners want release by the order of this writ court, I am not inclined to entertain this writ petition.
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2022 (7) TMI 983
Offence under FEMA - Levy of penalty post compounding orders - Power to compound contravention - HELD THAT:- The compounding order is passed on 20.11.2008 and the adjudication order levying penalty is passed on 21.11.2008, i.e., one day after the passing of the compounding order. Sub-section (2) of section 15 as alluded to hereinabove clearly envisages a position that once a contravention has been compounded under sub-section (1) (which in the present case has been compounded on 20.11.2008), no proceeding or further proceeding, as the case may be, shall be initiated or continued, as the case may be, against the person committing the contravention.
We cannot hold petitioners responsible for contravention once the compounding orders have been passed. We have noted that there is a gap of “one day” between the passing of the two sets of orders, i.e., compounding orders and adjudicating order. Be that as it may, petitioners cannot be faulted and held liable for contravention once the compounding orders are passed by the Compounding Authority. That is the mandate of the statute.
As also fairly conceded that respondents though aggrieved with the five compounding orders, have not challenged the said orders. If respondents were indeed aggrieved with the compounding orders, it was open for respondents to challenge the said orders. Having not done so, respondents cannot justify passing the adjudication order once the compounding orders have been passed and complied with by petitioners. Passing of the adjudication order after the offence has been compounded, is thus contrary to the statutory provisions discussed hereinabove, is not maintainable and thus without jurisdiction.
The impugned adjudication order passed by respondent No.1 is an appealable order and petitioners should be relegated to the alternate remedy of filing the statutory appeal under section 19 of the said Act before the Appellate Tribunal. This submission deserves to be rejected at the threshold. As held by us, the impugned adjudication order has been passed without jurisdiction in view of the fact that the offence contravened by petitioners have been compounded by the statutory Compounding Authority before the passing of the impugned order. Hence, we reject this submission advanced by Mr. Patil.
Writ Petition stands allowed in terms of prayer clause “c” which reads as under:
“c) that a writ in the nature of Mandamus may be issued commanding the Respondents to act according to law and/or cancel and/or withdraw and/or rescind the impugned order dated 21st November, 2008 passed by the Respondent No.1 and the Show Cause Notice dated 11th June, 2008 issued by the Respondent No.1 and all proceedings there under and/or in pursuance thereof.”
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2022 (7) TMI 826
Offence under FEMA - Scope of alternate remedy - violation of Section 4 of FEMA - Whether the writ petition is liable to be dismissed as not maintainable on the ground of availability of alternate remedy and the writ petition is premature? - HELD THAT:- FEMA is a complete Code in itself and is an act to consolidate and maintain law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange management in India. It also states that when statute creates a special mechanism for adjudication and when statute itself provides for remedy that too in a physical statute, a writ petition should not be entertained ignoring the statutory dispensation. The above judgment in Raj Kumar Shivhare [2010 (4) TMI 432 - SUPREME COURT] was rendered on 12.04.2010 much prior to insertion of Section 37A of FEMA, but it would not make any difference. Under Section 37A of FEMA also special mechanism is provided to determine the violation of Section 4 of FEMA.
Whether the Authorised Officer had reason to believe that any foreign exchange situated outside India is suspected to have been held in contravention of Section 4 or reasons recorded by the Authorised Officer would be sufficient to initiate action under Section 37-A of FEMA, are to be considered by the Competent Authority. At this stage, examining sufficiency of reason or otherwise under Article 226 of the Constitution of India would prejudice the case of either of the parties. It is best left to the Competent Authority to examine the same when it considers the entire issue under sub-Section (3) of Section 37-A of FEMA.
Section 37A of FEMA provides mechanism to decide the contravention or otherwise of Section 4 of FEMA. The case of the petitioner is at the stage of sub-Section [1] of Section 37A of FEMA which is impugned in the present writ petition. Timeline is fixed under Section 37A of FEMA for conclusion of the proceedings initiated by the Authorized Officer. The Authorized Officer has passed seizure order which is in the nature of provisional order is to be placed before the Competent Authority within 30 days from the date of such seizure order. The impugned order is dated 29.04.2022 and the learned Additional Solicitor General Sri. M.B. Naragund has submitted that within 30 days i.e., on 27.05.2022 itself the Authorized Officer has placed the seizure order along with relevant material before the Competent Authority. Since the seizure order and relevant material is already placed before the Competent Authority, it would be appropriate for this Court to direct Competent Authority to issue notice of hearing to the petitioner, hear the petitioner as well as representatives of the Directorate of Enforcement and pass appropriate orders in accordance with law. The timeline of 180 days mentioned in sub-Section [3] of Section 37A is an outer limit. In the facts and circumstances, since the petitioner contends that seizure order has affected day-to-day business of the petitioner, it would be appropriate for this Court to direct the Competent Authority to dispose of the petition expeditiously but not later than 60 days from the date of making available copy of this order.
The Competent Authority appointed by respondent No. 1 under Sub-section [2] of Section 37A of FEMA is directed to issue notice of hearing to the petitioner, hear the parties concerned and pass appropriate order either confirming or setting aside the seizure order within a period of 60 days from the date of making available a copy of this order.
This Court, by order dated 05.05.2022 stayed the impugned order dated 29.04.2022 (Annexure-A) subject to condition that the petitioner shall operate Bank accounts which are seized under the impugned order, only for the purpose of meeting expenses for carrying out day to day activities of the Company and observed that order shall not confer any right on the petitioner to make payment in the form of royalty or in any other form to the Companies located outside India. Further, on 12.05.2022, this Court clarified that the petitioner is at liberty to take Overdraft and make payments from such Overdrafts to Foreign Entities excluding payment of royalty. Interest of justice would be met, if the above interim order is continued till orders are passed by the Competent Authority as stated above. The interim order passed by this Court on 05.05.2022 and clarified on 12.05.2022 would enure to the benefit of the petitioner, till the Competent Authority passes order under sub-Section (3) of Section 37-A of FEMA.
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2022 (7) TMI 302
Amounts released despite the stay order - on query ASG accepts this - HELD THAT:- Prima facie this is contempt of the orders of this Court. On our asking the query as to which of the Officer(s) to whom the contempt has to be issued, learned senior counsel states that the amount will be released within 3 days and that this Court may hold its order on issuance of notice of contempt. We take this stand of the learned ASG on record.
Insofar as the constitution of the Tribunal is concerned, the affidavit states that the Search-cum-Selection Committee was appointed in terms of Order dated 26.10.2001. The process thereafter is taking place.
It is pointed out to us that the Chairman demitted office on 21.9.2019 being a retired judge of the High Court and thereafter a Single Member Tribunal doing only interim proceeding work and he too demitted office sometime in March-April, 2021. Even the last Chairman was on extension.
We are of the view that the status report does not reflect a complete picture and we would like to know the details as to what steps were taken starting from at least six months prior to the Chairman demitting office on 21.9.2019 to fill up that post right upto the department order dated 26.10.2021 with supporting documents.
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