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FEMA - Case Laws
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2021 (5) TMI 929
Offence under FEMA - Distinction between the two stages of the adjudication process - eligible reasons by the respondent no. 1 for the formation of opinion to proceed with the inquiry against the petitioner - HELD THAT:- The Adjudicating Authority, under the Scheme of the FEMA, performs a quasi-judicial function as opposed to a purely administrative function. The requirement of giving reasons therefore cannot be undermined and must be insisted upon from the Adjudicating Authority. The reasons to be given for its opinion under Rule 4(3) of the Adjudication Rules to proceed with the inquiry though need not be as elaborate as in a Court decision or let’s say an order passed by the Adjudicating Authority under Rule 4(8) of the Adjudication Rules, but have to be adequate, proper and intelligible, sufficiently clear and explicit. They must reasonably deal with the substantial points raised in the matter and show that they were taken into consideration. However, the extent and nature of reasons depend upon specific facts and circumstances of each case.
The Impugned Opinion/Order dated 05.06.2020, does not satisfy the test of giving reasons by the respondent no. 1 for the formation of opinion to proceed with the inquiry against the petitioner.
The reasons are the bridge between the material on record and the final decision. Therefore, after considering the judgment of the Supreme Court, the Complaint and the reply of the petitioner to show cause, that is the material on record, the Adjudicating Authority is to give reasons, howsoever brief, at least showing that he is alive to the contentions raised in the reply to the Show Cause Notice and why he is of the opinion that inquiry must still be held. In the present case, this bridge is missing.
It is also to be seen as to whether the inquiry deserves to be set aside only for the above violation. In the present case, as noted herein above, the Supreme Court has passed a detailed judgment finding various acts of violation of the FEMA and the Rules/Regulations framed there-under inter alia against the JP Morgan group of companies, may not be specifically by name against the petitioner. The present inquiry has been initiated on the direction of the Supreme Court in the said judgment. The allegations against the petitioner also cannot be said to be such that do not warrant any inquiry given the above factual background. The role of the petitioner and its employees and the capacity in which they acted in the transactions in question need a detailed inquiry as such allegations form part of a larger whole which is being inquired into.
Considering that at the stage of Rule 4(3) of the Adjudication Rules, the Adjudicating Authority was merely to form an opinion whether to proceed with the inquiry; and as held by the Supreme Court in Natwar Singh [2010 (10) TMI 156 - SUPREME COURT] it is only thereafter that the “real and substantial inquiry into allegations of contravention begins”; and that unlike the final order imposing penalty, “the opinion formed by the Adjudicating Authority whether an inquiry should be held into the allegations made in the complaint are not fraught with such grave consequences”, and as held by the High Court of Bombay in Shashank Vyankatesh Manohar [2013 (8) TMI 435 - BOMBAY HIGH COURT] that “in case the objections are such as would require detailed consideration, the authority concerned can dispose of the objections by stating that the same would require detailed consideration, which would be done at the disposal of the notice by the final order”, it is held that there was enough reason for the respondent no. 1 to form an opinion to proceed with the inquiry against the petitioner and no useful purpose would be served by quashing the impugned Opinion and insisting on the reasons to be first recorded. Exercise of powers under Article 226 being discretionary in nature, this court, in the peculiar facts of the present petitions, does not find it fit to exercise the same.
Even though the Impugned Opinion of the Adjudicating Authority does not record any reasons for the same, the same is sustained. This shall, however, not be considered as an affirmation of this Court to the manner in which such opinion is to be recorded. It is also made clear that this Court has not expressed any opinion on the merit of the allegations made against the petitioner in the Show Cause Notice or the inquiry.
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2021 (5) TMI 198
Applicant in respect of Section 31(1) of FERA - time-limit for cognizance of any offence under FERA - suit for specific performance for dismissal of the suit and rejection of the plaint under Order VII Rule 11 of The Code of Civil Procedure, 1908 (CPC) on the ground that the suit is barred by law - HELD THAT:- The statement in the plaint has been made with reference to the letter dated 14th December, 1989 from the lawyers of the plaintiff to Helen Wilson which reveals that Helen Wilson was a foreign national and hence came within the statutory requirement of Section 31(1) of FERA. This letter also reveals that Helen Wilson may not have had the permission of the RBI or communicated such permission to the plaintiff as on 14th December, 1989 which would be corroborated by the letter of 8th October, 1993 of the RBI granting permission to Helen Wilson under Section 31(1) of FERA.
The letter of 8th October, 1993 has been brought on record by the applicant defendant no.3 as a part of the application for dismissal of the suit. Order VII Rule 11(d) applies where the plaint, on the face of it, is barred by law and the contravention of the law must be clear and unambiguous from the plaint itself. A Court which is called upon to decide the issue cannot engage with the alleged statutory violation or the fact to be determined beyond the limits of what the plaint discloses. The letter dated 14th December, 1989 would have served the objective of the defendant no.3 of having the suit dismissed if by such letter the Court could have come to an indisputable conclusion that Helen Wilson, a foreign national, had alienated the property by way of sale or gift or otherwise in favour of the plaintiff without first obtaining the permission from the Reserve Bank of India under Section 31(1) of FERA.
This is obviously not the case since the plaintiff was constrained to file a suit on 18th July, 1990 precisely because the agreement had not been executed hence necessitating a direction on the original defendant to execute and register the deed of conveyance in terms of the agreement for sale dated 2nd January, 1989.
The contention of the applicant in respect of Section 31(1) of FERA, subject to Section 49(3) of FEMA setting the time-limit for cognizance of any offence under FERA, would have also been acceptable had Helen Wilson attempted to set the property in motion from herself to the plaintiff without first complying with the statutory requirement as existed on the date of sale of the property. Since this is not the factual position, this Court is not persuaded to dismiss the suit or reject the plaint for contravention of any law which existed on the date when the suit was filed.
The prayers must hence be rejected and the application for dismissal of the suit is accordingly dismissed without any order as to costs. The suit shall be listed for hearing after the summer holidays.
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2021 (5) TMI 190
Search and seizure operation carried out by the officers of the Enforcement Directorate under FEMA - excess jewellery seized - HELD THAT:- With regard to the search and seizure of the excess jewellery that has been seized by the Enforcement Directorate, it is to be noted that in the writ petition, the petitioner has relied on several documents to indicate that this “excess jewellery” was duly accounted for and had been sent for job work. In my view, the Enforcement Directorate should look into the documents filed in the writ petition and pass a reasoned order on whether these goods are stock-in-trade or not.
In the event, the Enforcement Directorate finds that the same are duly accounted for, the same should be released in favour of the petitioner in accordance with law. The above enquiry and the reasoned order should be passed within a period of eight weeks from date.
The authorities are also directed to allow the authorized representative of the petitioner-company to have a lawyer of his choice to be present during the summons at an inaudible distance as per the guidelines laid down by the Supreme Court.
The petitioner shall cooperate with the authorities. We further hasten to clarify that I have not gone into the merits of this case.With these above observations and directions, this writ petition stands disposed of
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2021 (4) TMI 1293
Offence under COFEPOSA ACT - detention order - respondents desired to unlock the mobile phone instrument of the petitioner to retrieve the materials/ documents therefrom but petitioner did not co-operate in the opening/ unlocking of his mobile phone instrument - HC held preventive detention of the petitioner in the assessment of the Detaining Authority, the Respondents had to collect evidence against the present petitioner, including recovering the relevant data from his mobile phone instrument, which took considerable time for reasons attributable primarily to the petitioner himself. No merit in the assertions of the petitioner - HELD THAT:- We are not inclined to entertain the Special Leave Petition under Article 136 of the Constitution of India.
Special Leave Petition is accordingly dismissed.
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2021 (4) TMI 82
Rejection of permission to remit foreign exchange - FEMA ODI Regulations - approval on the basis of the reservations expressed by ED - as the wholly owned subsidiary of the respondent has already taken the credit of foreign exchange from various lenders and the foreign exchange has already come to the country. It is only this foreign currency which is now being repaid by the respondent - Writ of Mandamus, directing Respondent to permit Petitioner to make additional commitments and payments of USD 300 Million to its wholly owned subsidiary namely Jindal Steel and Power (Mauritius) Limited by way of equity subscription or loan or corporate guarantee or bank guarantee or through other permitted mode from Indian Bank for meeting its debt obligations - HELD THAT:- We are of the view that the order of denial of permission dated 30.12.2019 based upon Regulation 9(3) of FEMA ODI Regulations gives no reason for rejecting the application of the respondent. Assuming for the sake of arguments that the reasons are contained in the e-mail of 30.12.2019 as well as in the letter of 03.12.2019, we are also required to see that the reasons so mentioned are not arbitrary, whimsical and in accordance with the scheme of the FEMA. The reasons for rejection must be considered and also must relate to the dominant purpose of the FEMA Regulations which is conservation of Foreign Exchange.
The reason contained in the e-mail of 30.12.2019 namely “reservation expressed by DOE/on-going investigations” and in the letter of 03.12.2019 namely “conducting investigations against M/s Jindal Steel Power under FEMA in four cases” and “conducting investigations under PMLA in three cases,” cannot be a ground for denial of permission. The appellant cannot deny approval merely on the premise of pending investigation. It is not the case of the RBI, in the appeal, counter affidavit in the writ petition or argued before us that the remittances made in the past by the respondent have been misused. Till date pursuant to the permission of the RBI the respondent has remitted a total amount of 241.14 million USD (USD 90 million+ USD 54.99 million+ USD 96.15 million). Hence, we hold that even if we look at the reasons for rejection contained in the order dated 30.12.2019, the reasons are arbitrary, whimsical and do not further the scheme of Foreign Exchange Management Act.
The reliance on word “inter alia” under Regulation 9(3) - Regulation 9(3) the word “inter alia” of FEMA ODI Regulations must take its colour from the scheme, drift and tenor of the Act as well as Regulations. The FEMA ODI Regulations do not contemplate any role of the third party or the agency for approval or for prior approval, least of all investigating agency. The only mention of pending investigation is under Regulation 6(2) (iii) ie. If the Indian Party is under RBI caution list/lists of defaulters or under investigation by an investigation/enforcement agency or by a regulatory body. The very fact that Regulation 9(3) makes a conscious omission of pending investigations, by an investigation/ enforcement agency, further strengthens our opinion that merely an on-going enquiry /pending investigations cannot be a ground for rejection of permission to remit Foreign Exchange. It will be relevant to point out that all permissions given by the appellant have categorically stated “each permission is without prejudice to any action that may be taken by any investigative agency on account of contravention”.
We also note with approval that even after “so-called reservation” indicated by the DOE, the appellant has granted permission to the respondent on 09.09.2020 indicating “no objection from the FEMA 1999 angle.” The counter affidavit of the appellant has reiterated that the conditions imposed in the letter of 09.09.2020 are in line with FEMA ODI Regulations. Hence, we hold that the denial of permission dated 30.12.2019 based upon Regulation 9(3) of FEMA ODI Regulations is wrong.
Learned Single Judge has not adverted to the preliminary objections raised in the counter affidavit.
No finding against ED could have been given without ED being a party - We are unable to agree with this contention of the appellant as there is no finding given against the ED by the learned Single Judge. The learned Single Judge in Para 38 of the impugned order and judgment dated 04.12.2020 has observed merely that there is nothing on record of the writ court which shows that any demand appears to have been raised by the ED on the respondent. The learned Single Judge has further held that DOE has enough power under various statutory regimes to attach properties and assets of the defaulter individual.
The appellant has rejected the application of the respondent at the behest of ED - We have already, while adverting to the arguments of the learned Sr. Counsel for the appellant in ground (A) held that the reasons for rejection have been merely the apprehension expressed by the ED. The said apprehension of the ED is neither in spirit of the scheme of FEMA nor Regulation 9(3). The reliance of RBI on the apprehensions expressed by ED in its e-mail of 30.12.2019 and the letter of 03.09.2020 itself has been held by us to be incorrect and hence, the rejection by the appellant dated 30.12.2019 is incorrect. In view of the above, the reliance placed on the judgment State of Bihar v. Asis Kumar Mukherjee (Dr) [1974 (12) TMI 74 - SUPREME COURT] is misplaced.
The appellant taking u-turn by taking permission - During the course of arguments the learned Sr. Counsel for the respondent has categorically made the statement that they would give a Board Resolution to deposit equivalent amount of the said financial commitment amounting to USD 241.5 million and an undertaking that it had unencumbered assets worth USD 241.5 million but the same was not acceptable to the respondent. Be that as it may, it is clear that the letter of 09.09.2020 was issued by the respondent after the so-called Panama/Mauritius Leaks and there is no justification or satisfactory explanation as to why the permission was granted even as late as 09.09.2020.
Moreover, the learned Sr. Counsel for the appellant had relied on the Judgment M/s. Mahabir Jute Mills LTD., Gorakhpore Vs. Shri Shibban Lal Saxena and Ors [1975 (7) TMI 148 - SUPREME COURT] to urge that the very fact that the appellant chose not to challenge the order and in fact comply with the same cannot be held against them. The said judgment need not detain us as we are of the opinion that the order dated 30.12.2019 is itself flawed.
Application filed under Order I Rule 10 read with Section 151 of CPC by the Directorate of Enforcement seeking impleadment as a respondent in the present appeal - HELD THAT:- A proper party is a person whose presence would enable the court who completely, effectively and properly adjudicate upon all matters and issues, though he may not be the person in favour of or against whom a decree is to be made for the reasons we have elaborated in our judgment dated 26.03.2021.
We feel that DOE is neither a proper nor a necessary party to the present proceedings as no relief is claimed against DOE
ii. The disputes in question can be effectively, completely and properly be adjudicated in the absence of applicant.
We are also persuaded by the fact that there is no averment in the application as to why DOE chose not to file a similar application for impleadment in the original writ proceedings and has only come up for the first time in the present appeal. The application is totally silent on the said ground. In this view of the matter we find no merit in the application and the same is dismissed.
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2021 (3) TMI 1303
Search and seizure operation carried out by officers of FEMA - seizure of certain gold jewellery - maintainability of appeal - As argued bullion or jewellery being stock-in-trade of the business cannot be seized by the authorities - HELD THAT:- With regard to the maintainability point, as part of the cause of action has arisen within the State of West Bengal, that is, the search and seizure has taken place in West Bengal and the petitioner is residing at West Bengal, in my view, there is no impediment in entertaining this writ petition before this High Court.
Clause (2) of Article 226 of the Constitution of India clearly allows this High Court to have jurisdiction in such cases wherein the cause of action has partly arisen notwithstanding the fact that the seat of the authority dealing with the issue is outside the jurisdiction.
Search and seizure of the excess jewellery that has been seized by the Enforcement Directorate, it is to be noted that in the writ petition, the petitioner has relied on several documents to indicate that this “excess jewellery” was duly accounted for and had been sent for job work. In my view, the Enforcement Directorate should look into the documents filed in the writ petition and pass a reasoned order on whether these goods are stock-in-trade or not.
Enforcement Directorate finds that the same are duly accounted for, the same should be released in favour of the petitioner in accordance with law. The above enquiry and the reasoned order should be passed within a period of eight weeks from date.The authorities are also directed to allow the petitioner to have a lawyer of his choice to be present during the summons at an inaudible distance as per the guidelines laid down by the Supreme Court.
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2021 (3) TMI 92
Transaction entered into by a foreign citizen of “Indian origin”, to deal with real estate in India on certain conditions - transaction (specified in Section 31 of the 1973 Act) entered into in contravention of that provision is void or is only voidable and it can be voided at whose instance - Mandation to get general or special permission of the RBI for transfer or disposal of immovable property situated in India by sale or mortgage by a person, who is not a citizen of India - HELD THAT:- Foreigners should not be permitted/allowed to deal with real estate in India; the peremptory condition of seeking previous permission of the RBI before engaging in transactions specified in Section 31 of the 1973 Act and the consequences of penalty in case of contravention, the transfer of immovable property situated in India by a person, who is not a citizen of India, without previous permission of the RBI must be regarded as unenforceable and by implication a prohibited act. That can be avoided by the RBI and also by anyone who is affected directly or indirectly by such a transaction.
There is no reason to deny remedy to a person, who is directly or indirectly affected by such a transaction. He can set up challenge thereto by direct action or even by way of collateral or indirect challenge.
Until permission is accorded by the RBI, it would not be a lawful contract or agreement within the meaning of Section 10 read with Section 23 of the Contract Act. For, it remains a forbidden transaction unless permission is obtained from the RBI. The fact that the transaction can be taken forward after grant of permission by the RBI does not make the transaction any less forbidden at the time it is entered into. It would nevertheless be a case of transaction opposed to public policy and, thus, unlawful. In this view of the matter, the appellant must succeed and would be entitled for the reliefs claimed in O.S. No. 10079 of 1984 for declaration that the gift deed dated 11.03.1977 and supplementary deed dated 19.04.1980 in favour of respondent No.1 are invalid, unenforceable and not binding on the plaintiff.
A fortiori, the plaintiff is entitled for possession of the suit property from respondent no.1 and persons claiming through him, admeasuring 12,306 square feet and also mesne profits for the relevant period for which a separate inquiry needs to be initiated under Order 20 Rule 12 of the Code of Civil Procedure, 1908.
In the present case, the land was owned by a foreign citizen. For which reason, the rigours of Section 31 must apply with full force. Additionally, it must be kept in mind that the stated notification was issued in 1993, around which time a change in policy regarding the investment opportunities for non-resident Indians and foreigners had been crystallised, by opening up of economy in India. In the present case, we are dealing with the transaction effected close to the coming into force of the 1973 Act i.e., in the year 1977 when considerations were different and governed by different policy manifested in the form of enactment of Section 31 of the 1973 Act, spoken to by the then Finance Minister in the Lok Sabha, forbidding foreigners from dealing with real estate in India.
The condition predicated in Section 31 of the 1973 Act of obtaining “previous” general or special permission of the RBI for transfer or disposal of immovable property situated in India by sale or mortgage by a person, who is not a citizen of India, is mandatory. Until such permission is accorded, in law, the transfer cannot be given effect to; and for contravening with that requirement, the concerned person may be visited with penalty under Section 50 and other consequences provided for in the 1973 Act. Hence, the Trial Court as well as the High Court committed manifest error in dismissing the suit filed by the plaintiff for a declaration in respect of suit property admeasuring 12,306 square feet and for consequential reliefs referred to therein.
A priori, we conclude that the decisions of concerned High Courts taking the view that Section 31 of the 1973 Act is not mandatory and the transaction in contravention thereof is not void or unenforceable, is not a good law. However, transactions which have already become final including by virtue of the decision of the court of competent jurisdiction, need not be reopened or disturbed in any manner because of this pronouncement. This declaration/direction is being issued in exercise of our plenary power under Article 142 of the Constitution of India. For, there has been a paradigm shift in the general policy of investment by foreigners in India and more particularly, the 1973 Act itself stands repealed. Accordingly, we deem it appropriate to overrule the decisions of the High Courts, taking contrary view, albeit, prospectively.
The appeal is allowed. The impugned judgment and decree of the Trial Court, as confirmed by the High Court, is set aside.
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2021 (3) TMI 34
Offence under FEMA - Review Petition - Correction of clerical errors - respondent Sakunthala had received payment unauthorisedly in her residential premises - respondent Sakunthala that her husband Muthupal Chettiar was a partner in Kumaran and Co in Malaysia - The Appellate Board had found that there was a accidental slip and held in paragraph No.7 that ''After giving careful thought to the contentions of the parties, I find this to be a fit case where benefit of doubt should be given to the appellant at S.No.1 and 2 and therefore, hold that the charge against her have not been established'' -
HELD THAT:- Appellate Board upon satisfying that the accidental slip had occurred in the order attributable to an over-sight that the non-receipt of ₹ 75,000/- by the appellant at S.No.2 in the order conflicting with the conclusion reached in Appeal No.110 of 1984. Thus giving the benefit of doubt to the appellant at S.No.2, the Appellate Board has set aside the earlier order passed imposing punishment of fine. The said order is now under challenge in the present Civil Miscellaneous Appeal by the Enforcement Directorate contending that the Appellate Board has no power to review its onw order, as it is not a clerical or arithmetical error.
Clerical or arithmetical mistakes in any decision or order passed by the Appellate Board or the adjudicating officer under this Act, or errors arising therein from any accidental slip or omission may, at anytime, be corrected by the Appellate Board or the adjudicating officer or his successor in office, as the case may be. But the order in the review was passed only after hearing the authorities also.
The appellant is also not able to say what had happened after filing of the appeal. Whether the amounts are paid and whether the Petitioner is alive or not? Though the vakalath has been filed on behalf of the respondent, there is nobody appearing on behalf of her either in person or through counsel despite more than three chances have been given. Other than the above order, there is no other papers in the bundle. Therefore, we are constrained to confirm the order passed by the Appellate Board while dismissing the above Civil Miscellaneous Appeal
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2021 (2) TMI 1313
Validity of adjudication proceeding as contemplated in Section 13 of FEMA - limitation for initiation of the adjudicatory proceeding for imposition of penalty - proceedings are against a company - default had been in the knowledge of the prosecuting agency - manner as provided in Rule 4 of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 (as amended), read with rules and regulations made thereunder - HELD THAT:- In the instant case, information was sought from the petitioner in the year 2017 and when, despite letters, information was not provided and a prima facie case with regard to contravention of the provisions of FEMA, 1999 was made out, a complaint was filed in the year 2020 on which the impugned notice has been issued. The facts of the present case are therefore totally distinguishable from those which were there before the Bombay High Court in the case of Sanghvi Reconditioners Pvt. Ltd.[2017 (12) TMI 906 - BOMBAY HIGH COURT]
In the instant case, as we have already noticed, the information in respect of default by the petitioner company cannot be deemed to be with the Directorate of Enforcement, that is the prosecuting agency, therefore, the reasonable period to commence the adjudicatory proceeding would be counted from the date when that information was received by the prosecuting agency. As this is a pure question of fact and it is not shown to us that the default had been in the knowledge of the prosecuting agency far in excess of the reasonable period, the issue whether there had been an unreasonable delay in drawing adjudicatory proceeding would have to be raised and dealt with at the appropriate stage of the adjudicatory proceeding and not at this stage, while addressing a challenge to the show-cause notice because the show-cause notice, by disclosing the institution of the complaint and specifying the contravention of the provisions of FEMA, discloses all the necessary requirements to warrant initiation of adjudicatory proceeding against the petitioner.
As we find that the complaint discloses all the necessary ingredients to make out a prima facie case with regard to contravention of the provisions of FEMA, the impugned show-cause notice issued for adjudication of that complaint does not suffer from any legal infirmity which may justify its quashing, as has been prayed for. The petition is dismissed.
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2021 (2) TMI 915
Offence under COFEPOSA ACT - detention order - respondents desired to unlock the mobile phone instrument of the petitioner to retrieve the materials/ documents therefrom but petitioner did not co-operate in the opening/ unlocking of his mobile phone instrument - HELD THAT:- As timeline satisfactorily explains and justifies the time taken by the Respondents in undertaking investigation, which finally culminated in passing of the impugned Detention Order. The initial proposal sent by the Sponsoring Authority in February, 2019 was not found sufficient to justify the petitioner’s detention under Section 3 of the COFEPOSA Act. The Sponsoring Authority, therefore, continued with its efforts to conduct further investigation and, for that purpose, retrieval of the contents of the mobile phone of the petitioner was crucial. Vide his letter dated 23.04.19, the petitioner desired that the forensic examination of his phone be done in his presence.
Vide summons dated 21.05.19, he was asked to appear on 30.05.19. He did not appear. Another summons dated 06.06.19 was issued on 12.06.19. He appeared on 12.06.19. However, the petitioner did not cooperate. He did not provide the code to unlock his mobile phone on his own. He feigned ignorance and loss of memory with respect to the password/ code that left the respondents with no other option but to look for avenues to unlock the mobile phone even without the petitioner providing the password/ code. The respondents have stated that, ultimately, it was found that the mobile phone of the petitioner could be unlocked at the Cyber Laboratory of DRI, Mumbai. The respondents have stated that DRI, Mumbai is not a part of Air Customs. Thus, the submission that the respondents ought to have been aware of the existence of its facility at DRI, Mumbai to unlock the mobile phone of the petitioner, cannot be accepted on the basis of assumptions that the petitioner would like us to draw. The petitioner was sent a letter dated 20.11.2019 – informing that Forensic Examination of his mobile phone would be conducted at DRI, Mumbai on 25.11.2019. That letter could not be served on the petitioner, since he was not found residing on the given address. The fact that the petitioner did not intimate the change of his address or his definite address where he could be found, itself shows that the conduct of the petitioner was evasive. The petitioner was sent another letter dated 17.01.2020 at his new address in Ramesh Nagar informing him that forensic examination of his mobile phone would be undertaken at DRI, Mumbai on 20.01.2020. He was put to notice that, in case, he did not appear, either himself, or through his authorized representative, the forensic examination of his mobile phone would be conducted in the presence of other witnesses. Despite receipt of this notice, the petitioner failed to appear in the office of the DRI, Mumbai and, therefore, the forensic examination got conducted in the presence of other witnesses on 20.01.2020
In case, the petitioner was really interested in participating in the forensic examination, he should have appeared at DRI, Mumbai on 20.01.2020. His non-appearance on that day, and non-appearance of even his authorized representative shows that the endeavor of the petitioner was merely to drag the matter and delay the forensic examination of his mobile phone for as long as it could be done. Thus, the delay in the forensic examination of the petitioner’s mobile phone is primarily attributable to the petitioner, and not to the respondents. We, therefore, reject the submission of the petitioner that there was any unexplained delay on the part of the respondents in the forensic examination of his mobile phone between 1-2.02.2019 and 20.01.2020.
We are also of the view that in the facts and circumstances of this case, it cannot be concluded that the livelink between the prejudicial activity in which the petitioner was found involved on 1-2.02.2019 and the purpose and object of detention, when the detention order was passed on 05.06.2020, was broken. Mere passage of time between the date of the prejudicial activity and the date on which the detention order came to be passed – when the said passage of time has been sufficiently explained by the respondents, cannot lead to the definite conclusion with regard to the snapping of the nexus between the two.
The petitioner also cannot take shelter of the argument regarding the time lapse between the detention order passed against his brother Mr. Gaganjot Singh, and the detention order passed against himself. The brother of the petitioner is purported to be the kingpin of the smuggling ring which allegedly caused immense economic loss to the country. The CSC and the Detaining Authority found the evidence against him to be sufficient to proceed against him in 2019 itself, which resulted in the passing of the Detention Order dated 11.03.19 against him. To justify the preventive detention of the petitioner in the assessment of the Detaining Authority, the Respondents had to collect evidence against the present petitioner, including recovering the relevant data from his mobile phone instrument, which took considerable time for reasons attributable primarily to the petitioner himself. No merit in the assertions of the petitioner. We, accordingly, dismiss the petition
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2021 (2) TMI 904
Offences under FEMA Act - whether show cause notice has been issued without considering the amendments made in various regulations framed under FEMA Act, 1999? - HELD THAT:- There is no dispute that there are transactions in foreign exchange either as derivatives or in the form of currency futures. The issue in this matter is as to whether the transactions have been made in accordance with Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 or not. The issue can be sorted out only after all the relevant documents are placed before the authorities. Thus, not entering into the merits of the case.
Considering the pandemic situation, the authorities are requested to allow the petitioners to submit their record within 8 (eight) weeks from today. The oral submissions of the petitioners be recorded by way of video conference. This exercise should be concluded within a period of 4 (four) months from date and it is expected that the authorities will conclude the proceeding within 6 (six) months.
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2020 (12) TMI 486
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
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
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
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
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
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
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
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
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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