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2019 (5) TMI 817 - AT - FEMAForeign Direct Investments (FDI) - Non-compliance of the condition of minimum capitalization - requirement of prior permission and allowing automatic route for FDI by foreign companies in township development - Guilty of the charge in respect of the transaction of transfer of shares - liability of director - guilty of the provisions of Reg. 3 & Reg. 5(1) r/w Schedule 1 of FEMA 20/2000 - Restriction on issue or transfer of security by a person resident outside India - HELD THAT:- The minimum amount of FDI is required to be brought in “within a period of six months of commencement of business of the company”. It is evident from the Complaint that the respondent had initiated investigation against the appellant company soon after the first installment of USD 2.5 Million, thereby frustrating further compliance with the condition of minimum capitalization by their own action. The amount of USD 10 Million is required to be brought in within six months from the commencement of the business of the company. Since the business of development and construction of township could not be commenced due to the action of the respondent, the period of compliance with the condition had yet to commence. The allegation is, therefore, premature and, therefore, the question of contravention does not arise. In the light of above, we are of the considered opinion that the Adjudicating Authority has misapplied the condition of Sl. no. 23 in respect of FDI in township development to NRIs contrary to FDI in township development under Sl. no. 2 of Annexure B which is without any condition whatsoever. The impugned order is quashed and set-aside as the appellant no.1 is not guilty of alleged contravention. The penalty imposed was not called for. As regards Ashok Jain is concerned, he has been held guilty by fastening vicarious liability on him. There is no specifically averment of incriminating acts of commission or omission in his part, as the impugned order holding the company is not guilty of contravention. The order against Ashok Jain is also set-aside, even otherwise he is not liable to be punished for contravention as he has carried out the transaction with due diligence and complied with every formality including the post transaction reporting condition prescribed by RBI. There is no evidence of any disregard or neglect in observing and complying with the provisions of the law. Therefore, the impugned order is set-aside against the appellant no. 2. The appeal filed by the respondent has become infructuous in view of appeals filed by the private parties are allowed on the reasons already given. Hence, the same is dismissed.
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