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2017 (5) TMI 852 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE

2017 (5) TMI 852 - APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE - TMI - Violation of Section 3 of FEMA, 1999 - Held that:- In the present case, the remitter and investor are different and are not in accordance with the Regulations made by the Reserve Bank of India under the Act. The remittance 1 and remittance 2 were made by the person other than the investor and are in direct contravention of Regulation 5 of FEMA (Permissible Capital Account Transactions) Regulations, 2000. - From the perusal of .....

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(Permissible Capital Account Transactions) Regulations, 2000, and Para 9 (1) (A) of schedule to the Foreign Exchange Management (Transfer one! Issue of Security by a Person Resident outside India) Regulations, 2000. We agree with the observations of the Adjudicating Authority expressed in para nos. 73 to m of the Adjudication Order. SCNs 1 to 4 were rightly issued. - The penalty amount, if any deposited by the appellants as pre-deposit will be adjusted and the balance amount will be paid by .....

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For The Appellant : Amar Dave, Deep Roy, Udit Jain and Rohan Shah Ld For The Respondent : M.R. Venkatesh ORDER Dr. H.K. Mudgil, Actg. Chairperson - We have heard Mr. Amar Dave, Ld. Advocate along with Mr. Deep Roy and Mr. Udit Jain, Ld. Advocates for the appellants in Appeal Nos.9-12/2013 & Mr. Rohan Shah, Ld. Advocate for the appellants in Appeal Nos. 13-19/2013 & Mr. M.R. Venkatesh, Ld. Chartered Accountant/Presenting Officer for the respondents, Enforcement Directorate and have also .....

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t was reserved. While, we were perusing the record of the instant appeals for dictation on 13.01.2017, we observed that all the referred judgements, mentioned in the latest written submissions of the appellants, submitted on 06.01.2017 before the Bench had not been placed on record, while some judgements were placed on record at the time of arguments. The appellants were directed to furnish the copies of referred judgements, mentioned in the written submissions within a week, which were earlier .....

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4.01.2017 & it was submitted by both the parties that compliance of the interim order, dated 13.01.2017 had been made & no other new point was involved in the instant matters & the arguments heard on 05.01.2017 & 06.01.2017 on behalf of both the parties be taken into consideration for the decision of the cases, on the basis of case laws. It is relevant to mention that only those judgements, which were referred in the written submissions and placed on record on behalf of both the .....

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provisions of Section 3 (b) .Section 6(2), 6 (3)b & Section 42 (1) of FEMA, 1999 read with Regulation 5 (1) of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, Paragraph 8 of schedule 1 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, Regulation 5 of the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 and Para 9 (1) .....

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eing disposed of by a common order. 5. Brief facts relevant for the disposal of the appeals are that on receipt of certain reliable information, enquiries were initiated by the Mumbai Zonal Office of the Enforcement Directorate into the functioning of the Twenty-20 Cricket Tournament known as Indian Premier League (IPL) organized by the Board of Control for Cricket in India (BCCI). Directions under section 37 of the FEMA, 1999 were issued to the BCCI on 29.05.2008 and 14.07.2008 to furnish requi .....

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vitation to Tender (ITT), which was an invitation for all to submit bids for owning and operating a team for participation in the competition. The bidders were required to choose from eight (8) locations to operate their team which were Mumbai, Delhi, Chennai, Kolkata, Bangalore, Hyderabad, Mohali and Jaipur. A bidder was eligible to bid for a franchise in up to 8 locations though one bidder finally would be awarded only one franchise. For the bid to be successful, several criteria with respect .....

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K., who submitted a bid of U3$ 67 Million (Rs.268 crores) for Jaipur was declared successful bidder on 24.01.2008. The amount of ₹ 268 crores was to be paid over a period of 10 years in 10 equal installments. The franchise for Jaipur location was named as Rajasthan Royals and the franchise agreement for this was signed between appellant, M/s. Jaipur IPL Cricket Pvt. Ltd. (JIPL) and BCCI. Mr. Fraser Castillino, the then CEO, JIPL signed the agreement on behalf of JIPL on 02.04.2008 and Mr. .....

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re respectively transferred on 21.08.2008 and 22.01.2008. totaling GBP26,32,026.72 equivalent to ₹ 20,19,87,410.23/- by appellant Manoj Badale from U.K. on behalf of M/s. Emerging Media IPL Ltd. U.K. (EMIPL) towards performance deposit. The performance of remittance as shown in the two FIRCs dated 04.08.2008 issued by HDFC Bank, Mumbai was towards tender deposit for sponsorship of teams in IPL, the name of the beneficiary was shown as BCCI-IPL in the FIRCs. It is contended that the amount .....

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nk from Standard Chartered Bank, Mumbai, which in turn received the amount from Standard Chartered Bank, Mauritius. Thus the total amount remitted to BCCI by appellant, Manoj Badale and M/s. EMSH, Mauritius was ₹ 23,49,27,410.23/- equal to GBP 26,32,026.72 plus US$7,73,480.99. From the documents furnished by JIPL it was revealed that the company was incorporated on 08.03.2008 only, is a wholly owned subsidiary (WOS) of M/s.EMSH, Mauritius, which was incorporated on 05.05.2008. The paid up .....

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ldings Ltd., Mauritius for ₹ 50,000 which was received by Mr. Fraser Castillino by way of inward remittance. JIIPL vide its letter dated 14th October, 2009 had also provided the details of foreign investment in their company and it was found that apart from the three remittances mentioned above, M/s. JIPL had also received total amount of US$23,93,617.76 equivalent to ₹ 9,73,18,034/- from 18.04.2008 to 23.05.2008 from M/s. N.D. Investments, LLP, U.K., appellant Manoj Badale which wer .....

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appellant, Manoj Badale to BCCI after the successful bid for Rajasthan Royals. The balance deposit was paid to BCCI by M/s. EMSH, Mauritius and as it was imperative to set up an Indian company for signing franchise agreement with BCCI. He along with Mr. Fraser Castillino formed JIPL on 08.03.2008 in which both were 50% shareholders. The paid up capital of the company was ₹ 1 lakh. The company was to support appellant, Manoj Badale as per the requirements of IPL. He further stated that out .....

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oval for issue of 1983 shares to M/s. EMSH, Mauritius for ₹ 3,29,40,000/- (US$ 7,73,480.99) which was paid by the aforesaid company to BCCI towards franchise fee and for issuing 12159 shares to M/s. EMIPL, UK for ₹ 20,19,87,410) (GBP 25,82,026.72 + GBP 50,000) which was paid by the said M/s. EMPIL, UK to BCCI towards performance deposit. The said application of JIPL was rejected by the FIPB vide their letter dated 23-11-2009 stating therein as under:- "I am directed to refer to .....

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adale and M/s. EMSH, Mauritius to BCCI towards performance deposit and franchise fee. The said application dated 28-10-2009 was rejected by the FBI vide there letter dated 23-12-2009 wherein RBI informing JIPL through Axis Bank, the authorized dealer through whom the application was filed, as under:- "Please refer to your letter No. AXIS/BANKW/fo3Qo/2009 dated November, 24, 2009 on the captioned subject. In this connection, we advise that an Indian company receiving share subscription from .....

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gn investors against the payment of performance/security deposit paid directly to BCCI." 11. Thereafter, JIPL filed a fresh application before the FIPB on 25th January, 2010 interalia seeking permission to issue 14,142 shares to M/s EMSH, Mauritius against the performance deposit and franchise fee directly to BCCI. The said application of JIPL was also rejected by FIPB vide letter dated 24-5-2010 stating therein as under: - "I am directed to refer to your letter dated January 25, 2010 .....

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nts therewith, which includes a request to the AXIS Bank to forward the same to RBI for permission to issue shares to EMSH. In reply to the said letter, the RBI vide their letter dated 14-06-2010 interalia informed JIPL that the performance deposit payment made to BCCI by Mr. Manoj Badale on behalf of EMIPL and the franchise fee paid by EMSH can be at best treated as pre-incorporation expenses of JIPL and issue of shares to non-resident investor would tantamount to capitalization of pre-incorpor .....

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4 remittances. It appears that the foreign investors and JIPL have not followed the prescribed mode of payment under the regulations made under FEMA for FDI in equity. It is obvious that all the applications made by JIPL to FIPB and RBI seeking approval to issue shares to foreign investors were rejected. The report required to be filed to the RBI in connection with the receipt of the foreign remittances has also not been filed. 14. M/s JIPL has reflected in its balance sheet as on 31-12-2008 the .....

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Badale and ND Investments" LLP and no application has been made to RBI to refund of these amount to the foreign investors. 15. Para 9 of Schedule 1 to Regulation 5(1) of FEM (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 provides that an Indian company should report the receipt of consideration to issue shares to a person resident outside India to the RBI within 30 days. But no report has been filed to RBI in connection with the remittances of GBP 26,3 .....

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Statements of. Frasar Castellino, Satyen Saraswat, Manoj Badale, Suresh Chellaram, Ratnakar Shetty, N. Srinivasan, Ms. Manisha Budhwant & Vaibhav Karmarkar were recorded by the Enforcement Directorate. Complaint was filed & thereafter SCN was issued. 16. SCN I (Show Cause Notice) was issued to the appellant M/s Jaipur IPL Cricket Pvt. Ltd. for contraventions: (i) under section 6(3) (b) of FEMA read with Regulation 5 (1) of Foreign Exchange Management (Transfer or Issue of Security by a P .....

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ule 1 thereto and also read with Regulation 5 of Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 issued under section 6 (2) of FEMA to the extent of ₹ 9,73,l8,034/- and (iii) for contravention of section 6(3) (b) of FEMA read with Regulation 5(1) of Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 and also read with para 9 (1) (A) of Schedule 1 thereto to the extent of ₹ 23,49,27, .....

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ement (Transfer or Issue of security by a Person Resident outside India) Regulations, 2000 to the extent of ₹ 23,49,27,410/-and ₹ 9,73,18,034/.- totaling to ₹ 33,22,45,444/- and Mr Bishwarnath Bachun, Mrs. Samila Sivaramen, Mrs. Barbara Jacqueline Haldi and Mr. Manoj Badale, Director of M/s EM Sporting Holdings Ltd. and Shri Suresh Chellaram, Managing Director & Chief Executive of M/s Chellarams PLC, Nigeria were charged for above contraventions in terms of section 42 (1) o .....

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nament known as the Indian Premier League (in short IPL) organized by the Board of Control for Cricket in India. Replies on behalf of the noticees filed & adjudicating proceedings started. 20. The Adjudicating Authority Vide Adjudication Order No. ADJ/01- 04/B/SDE/BK/2013/FEMA, dated 30th January, 2013 held the appellants liable for contravention of the provisions of Section 3 (b),Section 6(2), 6(3)b & Section 42 (1) of FEMA, 1999 read with Regulation 5 (1) of Foreign Exchange Management .....

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mentioned in the Impugned Order. The Adjudicating Authority has imposed a total penalty of ₹ 98,35,00,000/- ( Rs. Ninety eight crores thirty five lakhs) against all the appellants namely; M/s Jaipur IPL Cricket Pvt. Ltd. as ₹ 32,30,00,000/-(Rs. Thirty two crores thirty lakhs), Mr. Ranjit Barthakur as ₹ 6,40,00,000/- (Rs. Six crores forty lakhs), Mr. Raghuram Iyer as ₹ 5,10,00,000/-(Rs. Five crores ten lakhs), Mr. Fraser Castellino as Rs, 6,40,00,000/- (Rs. Six crores for .....

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) and Mr. Manoj Badale as Rs. l6,20,00,000/-( Rs. Sixteen crores twenty lakhs) respectively. 21. Ld. Advocates for the appellants reiterated all the points mentioned in the appeals. The arguments of Mr. Dave, Ld. Advocate for the appellants in Appeal Nos. 9-12/2013 and Ld. Advocate Mr. Rohan Shah, for the appellants in Appeal nos. 13-19/2013 are almost on the same footing. Ld. Advocate for the appellants contended that the provisions of FEMA apply only to entities incorporated in India or indivi .....

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o the citizens of foreign country. Further submission is that there is no contravention of the provisions of FEMA, 1999 read with Foreign Exchange Management (Permissible Capital Account Transaction) Regulations, 2000 (PCAT) and Foreign Exchange Management Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 (TISPRO). It is further submitted that a. total penalty of ₹ 98,35,00,000/- (Rs. Ninety eight crores thirty five lakhs) has been imposed against all the .....

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is adopted to reach the quantum of such astronomical figure of penalty amount. IfIn this regard, the appellants relied upon the judgement of the Hon'ble Supreme Court titled as Ranjit Thakur v. Union of India, MANU/SC/0691/1987, equivalent AIR 1987 SC 2386, wherein the Hon'ble Supreme court held as: ♦ (para 9) "Re: contention (d): Judicial review generally speaking, is not directed against a decision, but is directed against the "decision making process". The questio .....

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nce of the Court-Martial, if the decision of the Court even as to sentence is an outrageous defiance of logic, then the sentence would not be immune from correction. Irrationality and perversity are recognized grounds of judicial review. In Council of Civil Service Unions v. Minister For The Civil Service [1984] 3 WLR1174 Lord Daglock said: ...Judicial Review has, I think, developed to a stage today when without re-iterating any analysis of the steps by which the development has come about, one .....

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recognized in the administrative law of several of our fellow members of the European Economic Community.... In Bhagat Ram v. State of Himachal Pradesh AIR 1953 SC 454 this Court held: It is equally true that the penalty imposed must be commensurate with the gravity of the misconduct and that any penalty disproportion to the gravity of the misconduct would be violative of Article 14 of the Constitution. The point to note, and emphasise is that all powers have legal limits. In the present case t .....

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tated with all monetary and service benefits. There will, however, be no order as to costs." 22. Further submission is that the entire matter relates to three remittances; remittance no. 1, total amounting to ₹ 20,19,87,410.23/- i.e (Rs. 19,81,18,910.23/- + ₹ 3868500/-) equivalent to GBP 26,32,026.72(GBP 25,82,026.72 + GBP 50,000) was sent to BCCI directly by Mr Manoj Badale on 21st and 22nd January 2008 respectively towards tender deposit for sponsorship of teams to the Indian .....

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that remittance No. 1 was made at a time when JIPL was not even incorporated. Remittance N0.2 was made when EMSH, the entity that hold the entire shareholdings of JIPL, was not incorporated and the bank accounts were not operational. Remittance No.3 was at a time when BCCI wanted the relevant funds within a very short timeline. Further submission is that in December, 2007, the BCCI issued global tender inviting bids for the twenty 20 competition. The invitation for tender was open for all over t .....

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lder, revetted a deposit as remittance no. 1to BCCI. The bid of EM PIL for Jaipur IPL was accepted and on 08.03.2008, Jaipur IPL was incorporated. The other submission is that in April-May, 2008, ND Investment LLP and Mr Manoj Badale remitted FDI in equity of JIPL which has been shown as remittance no. 2. Other submission is that on 05.05.2012, M/s EMSH was incorporated in Mauritius and on 09.06.2008, BCCI asked about Mr Manoj Badale to make payments for the first installment for the franchise w .....

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ceived in India through normal banking channel. Further, submission is that there is no breach of the provisions of the Act or of the Regulations made there under. Despite heavy investment having been made by the appellants, they have not been receiving due returns. Breach if any, is unintentional and technical in nature. The appellants acted bonafidely and in support of their submissions, they relied upon the judgements titled as under:- 1. Sunil Engg. Corpn. & Ors v. Union of India & O .....

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eld that: (Para 7) "In this view of the matter, there was hardly any doubt left regarding genuineness of the transactions which fact is not even disputed by the respondents. In these circumstances, the omission of the petitioners is merely a procedural irregularity. Reference is invited to the judgment of the Supreme Court in Hindustan Steel Ltd. v. The State of Orissa AIR 1970 SC 253 wherein the court while dealing on the question of imposition of penalty observed as under: "Penalty w .....

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ows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statue." In the case of M/s. Hindustan Steel Ltd, v. State of Orissa,1969 (2) Supreme Court Cases 627, equivalent AIR 1970 SC 253, Hon'ble Supreme Court inter-alia held that: ♦ (Para 8.) "Under the Act penalty may be imposed for failure to register as a dealer - Section 9(1) read with Section 25(i)(a) of the Act. But the liability to pay penalty does not arise merely upon proof .....

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rm a statutory obligation is a matter of discretion of the authority to be exercise.' judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statue. Those .....

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asis of bona fide belief that the goods were importable under OGL and that, therefore, the appellant deserves lenient treatment. It is therefore, to be considered whether in the light of this specific finding of the Customs, Excise & Gold (Control) Appellate Tribunal, the penalty and fine in lieu of confiscation require to be set aside and quashed. Moreover, the quantum of penalty and fine in lieu of confiscation are extremely harsh, excessive and unreasonable bearing in mind the bona fides .....

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regard and should admit of no controversy. CIT v. Anwal Ali, [1970] 76 ITR 696 (SC) was a ease undsr s. 28(1)1 c) of the Indian MP. Act, 192 which provided for penalties where the assesses concealed the particulars of his income or deliberately furnished inaccurate particulate of such income. The Supreme Court observed that, it appears to have been taken as settled by now in the sales tax law, that an order imposing penalty is the result of quasi-criminal proceedings. They also approved the view .....

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lty proceedings under one clause of s.27l(i) is different from those under another clause3 of the same sub-section. The matter has been placed beyond all doubt by the Supreme Court in Khemka and Co.(Agencies)Pot. Ltd. v. State of Maharashtra, [1975] 2 SCC 22: AIR 1975 SC 1549 by stating that the Income-tax Act, 1961, imposes penalty under ss. 270 and 271. These sections in I.T. Act provide for imposition of penalty on contumacious or fraudulent assesses. It, therefore, appears to us that while a .....

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decisions of the Supreme Court, we do not consider that any question of law has arisen and the Tribunal should be directed to state a case". 23. Ld. Counsel for the appellants further submitted that Section 42 (1) of FEMA 1999 is not applicable in the instant appeals because the role of the individuals /directors have not been fully explained and proved by the respondents and in this regard they miserably failed. There are no details in the SCN or Impugned Order in respect of the independe .....

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; Anr., 2008 SCC Online Del 685, equivalent (2008)103 DRJ 324. 3. Bhupendra V Shah v. Union of India and Others, Manu/DE/4067/2010. 4. Shashank Vyankatesh Manohar v. Union of India and the Directorate of Enforcement, MANU/MH/1132/2013, equivalent 2013(5) ALL MR 551 5. Shamsundar and others v. State of Haryana, [1989] 4 Supreme Court Cases 630. 6. Commissioner of Income tax West Bengal and another v. Anwar Ali, MANU/SC/0247/1970 (Supreme Court). In the case of Umesh K. Modi v. Deputy Director of .....

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not appear to have noticed the above decisions of the Supreme Court and has mechanically concluded that since there was no restriction on the exercise of powers by the Appellant in relation to the transactions in question, he should be held liable. IN light of the reply doted 9th April 2001 sent by the Appellant it was possible to discern the distinction between those directors who were in-charge of the day to day affairs of the company and those were not. The explanation offered by the Appellan .....

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ction 68(2) of the FERA and was entitled to the benefit of doubt. ♦ (para 20) Consequently, this court sets aside the impugned order dated 26th March, 2008 of the AT and the impugned AO dated 31st March, 2004 of the DD insofar by the Appellant is concerned and exonerates the charge of contravention of Section 8 (3) read with Section 8(4) and Section 68 of the FERA. ♦ (para 21) The appeal is allowed in the above terms, but in the facts and circumstances of the case, with no order as t .....

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Court Girdhari Lal Gupta held (SCC@190): "5. It seems to us quite clear that Section 23C(i) is a highly penal section as it makes a. person who was in-charge and responsible to the company for the conduct of its business vicariously liable for a offence committed by the company. Therefore, in accordance with well-settled principles this section should be construed strictly. 6. What then does the expression "a person in-charge and responsible for the conduct of the affairs of a company .....

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ed by a company and yet not be in-charge of the business of the company. Further it mentions manager, who usually is in charge of the business but not in over-all-charge. Similarly the other officers may be in charge of only some part of business. ♦ (para 19) Following the judgement of the Supreme Court in Girdhari Lal Gupta, it is clear that a complaint under Section 68 FERA read with 18(2) thereof would have to contain some specific averment as regards each of the Directors before making .....

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ns the petition is allowed. The petitioner stands discharged in the complaint case titled Chief Enforcement Officer V. Ratan Exports & Industries & Ors pending in the Court of the Ld. ACMM, New Delhi. However, the complaint will continue against the other accused, excluding Rajan Bagaria who has already been discharged by this Court by the order dated 8th February, 2008 in Crl. Misc. No.5094/2006. ♦ (para 21) The petition is accordingly allowed with no orders as to costs. The pendi .....

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or the conduct of its business. As regards two of the Petitioners, Bhupendra V. Shah and Manohar lal Tandon, the complaint itself refers to the Form 32 filed by each of them with the ROC showing that they ceased to be Directors of JTS from 14th November, 1997 onwards. If the export proceeds were to be realized by JTS for the year ending 31st March 1998, the contravention would be only thereafter, by which time these two Petitioners ceased to be Directors of JTS. Moreover, there is nothing in the .....

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earned Counsel for the petitioner that from all the statements recorded by the Assistant Director of Enforcement, it is clear that the petitioner had no role to play in the matter of opening bank account or obtaining Reserve Bank of India approvals or clearances. It is, therefore, submitted that the petitioner cannot be held responsible for any alleged violations of FEMA merely on the ground that be was Honorary President of BCCI and an ex-officio member of Governing Council of IPL. The learned .....

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tournament in South Africa only because, "the weather conditions in South Africa were better in England and the venues in South Africa were equipped with flood light facilities which were not available in all the stadiums in UK. ♦ (para 30) As it transpires from the complaint itself, day to day affairs and the operational matters of Second IPL in South Africa, such as, opening bank account, obtaining Reserve Bank of India permission, etc. were to be handled by the Secretary, Mr. Srini .....

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far as opening and operating of bank account of IPL or obtaining permission of Reserve Bank of India for making remittances or receipts of foreign exchange was concerned, the petitioner was not in charge of and responsible to BCCI for the aforesaid operational matters. It is also the petitioner's case that the remittances and receipts of foreign exchanges without obtaining permission of Reserve Bank of India which took place without the petitioner's knowledge. The petitioner had exercis .....

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Treasurer of BCCI were also present at the said meeting apart from Mr. Lalit Modi who was the Chairman of the Governing Council for IPL, as would be relected in the minutes of the said meeting. ♦ (Para 31). The learned Additional Solicitor General has invited our attention to the following observations in paragraphs 8 and 9 of the decision of the Supreme Court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and another, MANU/SC/0622/2005: (2005) 8 SCC 89, in relation to para material provi .....

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signation of an officer without more, may not be enough by way of an averment in a complaint. 9. The position of a managing director or a joint managing director in a company may be different. These persons, as the designation of their office suggests, are in charge of a company and are responsible for the conduct of the business of the company. In order to escape liability such persons may have to prove that when the offence was committed they had no knowledge of the offence or that they exerci .....

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company, how can a person be subjected to liability of criminal prosecution without it being averred in the complaint that he satisfies those requirements. Not every person connected with a company is made liable under Section 141. Liability is cast on persons who may have something to do with the transaction compliance of. A person who is in charge of and responsible lor conduct of business of a company would naturally know why the cheque in question was issued and why it got dishonoured. 10. W .....

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iness of the company, as well as the company, shall be deemed to be guilty of the offence, etc. What is required is that the persons who are sought to be made criminally liable under Section 141 should be, at the time the offence was committed, in charge of and responsible to the company for the conduct of the business of the company. Every person connected with the company shall not fall within the ambit of the provision. It is only those persons who were in charge of and responsible for the co .....

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s of merely holding a designation of office in a company. Commonly a person not holding any office or designation in a company may be liable if be satisfies the main requirement of being in charge of and responsible for the conduce of business of a company at the relevant time. Liability depends on the role one plays in the affairs of a company and not on designation or status. If being a director or manager or secretary was enough to cast criminal liability, the section would have said so. Inst .....

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submitted that the wider observations made by the Supreme in paragraph 9 have then been qualified by the principles laid down in paragraph 10 of the judgment. It is therefore submitted that, in any view of the matter, when the material on record as disclosed in the complaint itself was sufficient to persuade any reasonable person that the petitioner was not in charge of and responsible for anything relating to opening and operating bank account involving receipts and remittances of foreign exch .....

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(Para 34) Since the provisions of Section 42 of the Act are in pari material with the provisions of Section 141 of the Negotiable Instruments Act. 1881, the principles laid down by the Supreme Court in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and another, MANU/SC/0622/2005: (2005)8 SCC 89, are required to be applied to FEMA cases also. The Supreme Court has in terms held that the liability is cast on persons who may have something to do with the transaction complained of and not on the basis .....

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even in case of a person holding the position of a managing director, he will not be liable if he had no knowledge of the contravention when the contravention took place or if he had exercised all due diligence to prevent the contravention of the Act. The liability is thus cast on persons who had something to do with the transactions companied of. ♦ (para 35). Having further considered the rival submissions, we are of view that since the material on record was sufficient to take the view t .....

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ntion took place without his knowledge or that he exercised all due diligence to prevent such contravention. In fact, it is the case of the petitioner, which is not contradicted by any person whose statement was recorded at the investigation and in fact it is corroborated by the material which is part of the complaint, that the petitioner had stated in so many words at the BCCI meeting held on 26.03.2009 that the permission of the Reserve Bank of India would have to be obtained for opening a for .....

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ty under penal provision and not a civil liability. The penal provision must be strictly construed in the first place. Secondly, there is no vicarious liability in criminal law unless the statue takes that also within its fold. Section 10 does not provide for such liability. It does not make all the partners liable for the offence whether they do business or not. ♦ (Para 10) It is, therefore, necessary to add an emphatic note of caution in this regard. More often it is common that some of .....

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the offence tool: place without the knowledge or that be exercised all due diligence to prevent such offence arises only when the prosecution establishes that the requisite condition mentioned in sub-section(i) is established. The requisite condition is that the partner was responsible for carrying on the business in and was during the relevant time in charge of the business. In the absence of any such proof, no partner could be convicted. We, therefore, reject the contention urged by counsel fo .....

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the liability to pay such tax having been designed as penalty under Section 28. One-line of argument which has prevailed particularly with the Allahabad High Court in Lal Chand Gopal Das case is that there was no essential difference between tax and penalty because the liability for payment of both was imposed as a part of the-machinery of assessment and the penalty was merely an additional tax imposed in certain circumstances on account of the assessee's conduct. The justification of this v .....

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intended to be effective deterrent which will put a slop to practices which the legislature considers to be against the public interest. It is significant that: in C,A. Abraham's case MANU/SC/0124/1960 : (i96i)4iJTR.425(SC) this Court was not called upon to determine whether penally proceedings were penal or of quasi penal nature and the observations made with regard to penalty being an additional tax law that an order imposing penalty is the result of a quasi criminal proceedings; (Hindust .....

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la C.J., in Commissioner of Income-tax, Ahmedabad v. Gokuldas Harivallabhdas MANU/MH/0195/1958: [1958] 34 ITR 98(Bom) the gist of the offence under Section 28(1)© is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and therefore, the department must establish that the receipt of the amount in dispute constitutes income of the assessee. If there is no evidence on the record except the explanation given by the assess .....

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Order, However, the Adjudicating Authority mentions in the Impugned Order that since BCCI is no party to the Show Cause Notice, no action can ensue. Accordingly, it leaves no room for doubt that double standards have been applied qua the same portion of foreign exchange inflow . The appellants cannot be treated by a different yardstick when the inflow of foreign exchange, as lying with BCCI, by the same Impugned Order, is held to be not liable for any action (which must then by necessary implica .....

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quantum of penalties are disproportional to the alleged contraventions. In determining the quantum of penalty, the Ld. Adjudicating Authority has not considered the circumstances of the case. Hence, it is prayed that the Impugned Order dated 30.01.2013, passed by the Special Director, Enforcement Directorate be set aside and the instant appeals may be allowed in the interest of justice. 26. On the other hand, Mr. M. R. Venkatesh, Ld. Chartered Accountant/Presenting Officer on behalf of the resp .....

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dents and hence are not subject to jurisdiction of this Hon'ble Tribunal It is submitted that section 1(3) of the FEMA makes it abundantly clear that non-residents would also be subjected to the provision of FEMA. Hence, it is submitted that provisions of FEMA are applicable to any contravention made outside India by any person to whom the Act applies. The link/connection in India with respect to the transactions and the acts of the non-residents are clearly mentioned in the Impugned Order. .....

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arly shows that arrangement has been made to route the investment through Mauritius but the funds are flowing into India from United Kingdom which is not permissible. This would cause a significant loss to the Government exchequer if such transaction is allowed. It is an admitted position that neither RBI nor FIPB has approved the transactions of the appellants but the application made by the appellant has been rejected by RBI and FIPB not once but twice. It may also be noted that RBI through it .....

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letter dated 24.05.2010. It is also submitted that no legal remedy against the said opinion of FIPB has been claimed by the appellants. It is also noted that FIPB vide its letter dated 23.11.2009 has made a categorical finding that the company could not provide satisfactory proof of receipt of foreign exchange despite -ample opportunities given to them, which is clearly mentioned in-the Impugned Order. Further submission is that the approval of Foreign Investment Promotion Board (FIPB) is mandat .....

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0 days of receipt of remittance; Amount was not refunded within 180 days from the date of receipt of the inward remittance (shares not issued). It is also pointed out that the investments have been shown as "Foreign Direct Investment in India in equity" and the expenditure incurred were considered as pre-incorporation expenses being expenditure made prior to incorporation of the JIPL and were capitalized accordingly which are not under the ambit of general permission under the extant F .....

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to BCCI (instead of JIPL) for the reason that JIPL was not formed during the period does not find force under the provisions of law except for general or special permission given by RBI in this regard. In the present case no such approval has been granted. On the contrary, it is reiterated that applications made by the appellant were rejected being beyond the scope of FEMA. Even if the above claim of the appellant is accepted, the appellant has not explained as to why remittance directly made to .....

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of the appellant subject to certain conditions as mentioned in the Impugned Order. Admittedly, no compounding has been made till date thereby making the appellant ineligible to issue share to EMSH for non-fulfilment of the conditions specified by RBI. Further submission is that sub-section 2 of section 15 of FEMA refrains further proceedings only if the contravention has been compounded, the Special Director at para 79 and 95 of the Impugned Order is in line with the above and allowed such inves .....

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ade to any third party is not permitted under the provisions of FEMA. 30. Further submission is that Ld Advocates for the appellants relied upon the decision of Hindustan Steels v. State of Orissa (1972 83ITR 26) and stated that Department has to prove the willful misconduct of the appellants to impose penalty under criminal and quasi-criminal proceedings. It is submitted that section 13(1) of FEMA imposes only monetary penalty and' does not possess the character of criminal or quasi-crimina .....

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opment and maintenance of foreign exchange market in India. In the present case, there is violation of Section 3 of FEMA, 1999 and it is submitted that payments have been made by non-residents viz, Mr. Manoj Badale, M/s ND Investments and EMSH. Further submission is that no general or special approval of the ill Reserve Bank of India has been given in this regard. On the other hand, RBI directed JIPL to get the approval of FIFB which has rejected the application of the appellant twice. Hence, th .....

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e of, and was responsible to, the company for the conduct of its business at the time the contravention was committed shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. Hence all the directors of the company are liable under section 42 of FEMA, 1999. 33. There is also violation of Regulation 5 of Foreign Exchange Management(Transfer or Issue of Security by a Person Resident outside India) as the payment was made by Mr. Badale o .....

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een made to BCCI directly which has been claimed to be made on behalf of the JIPL, which is issuing its shares and the same is permissible in light of the above provision. The proviso to Regulation 8 of Schedule 1 of FEM (TISPRO) provides that where shares are not issued within 180 days from the date of receipt of inward remittance, the amount so received shall be refunded to the person concerned. Hence, the payment made to BCCI for consideration for issuance of share is in direct violation of R .....

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tisfactory explanation was given for such non-compliance and hence, violates Regulation 9(1) of Schedule 1 or FEM(TISPRO) Regulations, 2000. 34. Further submission is that JIPL was incorporated in March 20C8, whereas remittance was received in January 2008, wherein the condition could not have been fulfilled. It is submitted that the payment for investment shall be made by remittance from the account of the investor. However, in the present case, the remitter and investor are different and are n .....

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ons of Section 3 (b),Section 6(2), 6(3)b & Section 42 (1) of FEMA, 1999 read with Regulation 5 (1) of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India), Regulations, 2000, Paragraph 8 of schedule 1 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, Regulation 5 of the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000, and Para 9 (1) (A) of .....

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spondents, Enforcement Directorate and have perused the record carefully. 37. Farts gathered on: the pleadings and arguments on behalf of both the parties are that Board of Control for Cricket in India (BCCI) floated a tender called Invitation to Tender (ITT) which was an invitation to any person to submit a bid for owning and operating a team for participation in the Twenty 20 Cricket Competition. The business of operation of the team is referred to as 'Franchise' and the person who has .....

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unced as the winning bid on 24.01.2008. This amount of ₹ 268 crores was to be paid over a period of 10 years in 10 equal installments. The Franchise for the Jaipur location was named as "Rajasthan Royals" and the franchise agreement for this bid was signed between M/s Jaipur IPL Cricket Pvt. Ltd. (JIPL) and BCCI. Mr Fraser Castellino, then CEO of JIPL signed the agreement on behalf of IPL on 02.04.2008 and Mr Lalit Modi, Vice-President of BCCI and Chairman of IPL signed the agree .....

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and 23.5.2008 and one by Mr. Manoj Badale to JIPL on 23.5.2008 from UK. The third remittance amounting to ₹ 3,29,40,000/-was made by EM Sporting Holding Ltd. (EMSH), Mauritius to BCCI on 20.6.2008. 38. Four Show-Cause Notices were issued in respect to 3 remittances. SCN I (Show Cause Notice) was issued to the appellant M/s Jaipur IPL Cricket Pvt. Ltd. for contraventions: (i) under section 6(3) (b) of FEMA read with Regulation 5 (1) of Foreign Exchange Management (Transfer or Issue of Secu .....

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chedule 1 thereto and also read with Regulation 5 of Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 issued under section 6 (2) of FEMA to the extent of ₹ 9,73,18.034/- and (iii) for contravention of section 6(3) (b) of FEMA read with Regulation 5(1) of Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 and also read with para 9 (1) (A) of Schedule 1 thereto to the extent of $' ₹ .....

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ange Management (Transfer or Issue of security by a Person Resident outside India) Regulations, 2000 to the extent of ₹ 23,49,27,410/-and ₹ 9,73,18,034/- totaling to ₹ 33,22,45,444/- and Mr Bishwarnath Bachun, Mrs. Samila Sivaramen, Mrs. Barbara Jacqueline Haldi and Mr, Manoj Badale, Director of M/s EM Sporting Holdings Ltd. and Shri Suresh Chellaram, Managing Director & Chief Executive of M/s Chellarams PLC, Nigeria were charged for above contraventions in terms of section .....

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/01-04/B/SDE/BK/2013/FEMA, dated 30thJanuary, 2013, passed by Special Director, Enforcement Directorate, Mumbai, has imposed a total penalty of ₹ 98,35,00,000/- ( Rs. Ninety eight crores thirty five lakhs) against all the appellants namely; M/s Jaipur IPL Cricket Pvt. Ltd. as ₹ 32,30,00,000/-(Rs. Thirty two crores thirty lakhs), Mr. Ranjit Barthakur as ₹ 6,40,00,000/-(Rs. Six crores forty lakhs), Mr. Raghuram Iyer as ₹ 5,10,00,000/-(Rs. Five crores ten lakhs), Mr. Fraser .....

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ents LLP as ₹ 2,00,00,000/- (Rs. Two crores) and Mr. Manoj Badale as ₹ 16,20,00,000/-(Rs. Sixteen crores twenty lakhs) respectively, .for contravention of the provisions of Section 3 (b),Section 6(2), 6(3)b & Section 42 (1) of FEMA, 1999 read with Regulation 5 (1) of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India), Regulations, 2000, Paragraph 8 of schedule 1 of the Foreign Exchange Management (Transfer Issue of Security by a Person .....

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"Dealing in Foreign Exchange, etc - Save as otherwise provided in this Act, rules or regulations made thereunder, or with the general or special permission of the Reserve Bank, no person shall - (a) deal in or transfer any foreign exchange or foreign security to any person not being an authorised person; (b) make any payment to or for the credit of any person resident outside India in any manner" ♦ Section 6, FEMA, 1999 deals with capital account transactions and reads as under s .....

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rawl of foreign exchange for payments due on account of amortization of loans or for depreciation of direct investments in the ordinary course of business. (3) Without prejudice to the generality of the provisions of sub section(2),the Reserve Bank may, by regulations, prohibit, restrict or regulate the following- (a) transfer or issue of any foreign security by a person resident in India; (b) transfer or issue of any security by a person resident outside India." ♦ Section 42 (1) of F .....

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st and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to punishment if he proved that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention." ♦ Regulation 5(1) of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India), Regulations, 2000 as exiting at the time of contravention reads as under:- " (i) A person reside .....

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proval of the Foreign Investment Promotion Board of the Government of India, purchased shares and convertible debentures of an Indian company under Foreign Direct Investment Scheme, subject to the terms and conditions specified in Schedule 1."And • Paragraph 8 of schedule 1 of the Foreign Exchange Management (Transfer Or Issue of Security by a Person Resident outside India) Regulations, 2000 reads as under:- "A company in India issuing shares or convertible debentures under this S .....

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hat if the shares or convertible debentures are not issued within 180 days from the date of receipt of the inward remittance or date of debit to NRE/FCNR (B) account, the amount of consideration so received shall be refunded to the person concerned by outward remittance through normal banking channels or by credit to his NRE/FCNR (B) account, as the case may be: Provided further that the Reserve Bank may, on an application made to it and for sufficient reasons permit an Indian company to refund .....

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the regulations made by the Reserve Bank under the Act." And ♦ Para 9 (1) (A) of schedule 1 to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 is that the Indian Company has to file a report to the RBI within 30 days of the date of receipt of the amount of consideration for issuance of shares. 44. The contention of Ld Advocates for the appellants that provisions of FEMA are not applicable to non-residents/foreign na .....

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bundantly clear that the appellants fall under the category to whom the provisions of FEMA apply. Hence, the provisions of FEMA are applicable to any contravention made outside India by any person to whom the Act applies. The authority submitted by Ld. Advocates for the appellants titled as Fatima Bibi Ahmed Fate v. Stale of Gujrat and Another, 2003 (6) SCC 789 is not applicable as the fact;; are different. 45. No special or general permission exists for allowing the nature of transactions in th .....

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Promotion Board (FIPB) is mandatory as the transaction does not fall under the automatic route. With regard to first remittance, it is clear that contravention of the provisions of FEMA read with FEM (Transfer or Issue of Security by a Person Resident outside India), Regulations, 2000 and FEM (Permissible Capital Account Transaction) Regulations, 2000 have been made. It is also clear that payment was not made by the Investor; Payment was not received by the person issuing the shares; remittance .....

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EMSH which are two different transactions in the eye of law. The claim of the appellants that the funds have been transferred by Mr.Badale on behalf of EMSH to BCCI (instead of JIPL) for the reason that JIPL was not formed during the period does not find force under the provisions of law except for general or special permission given by RBI in this regard. In the present case no such approval has been granted rather the applications made by the appellant were rejected being beyond the scope of .....

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hat RBI took cognizance of the above deviation and accepted the request of the appellant subject to certain conditions as mentioned in the Impugned Order. With regard to third remittance, the remittance was made by EMSH to BCCI directly on 20.06.2008, whereas the JIPL was incorporated on 08.03.2008. The appellants have not provided any satisfactory explanation as to why the said remittance was made to BCCI in spite of the legal existence of the JPIL. Issue of shares for payment made to any third .....

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/- because BCCI is not a party to the SCN in question . With regard to tire remittance of ₹ 9,73,18,034/- there was a violation, accordingly, penalty was imposed by the Adjudicating Authority. We agree with the observations of the Adjudicating Authority as mentioned in para nos. 85 & 86 of the Adjudication Order No. ADJ/oi-04/B/SDE/BK/20i3/FE;MA, dated 30th January, 2013. 46. In the present case, there is violation of Section 3 of FEMA, 1999 as the payments have been made by non-reside .....

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e contravention was committed, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. In the present case, regarding die liability of the directors, we observe that they were responsible for the conduct of the business of the company at the relevant time because they were connected with the affairs of the company one way or the other & all the facts were in their knowledge. We are in. agreement with the findings of Ld. Adjudica .....

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he instant appeals and all the individuals, including Directors and Managing Directors are liable u/s 42(1) of FEMA,1999. 48. There is also violation of Regulation 5 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) as the payment was made by Mr. Badale on behalf of EMSH even when it was not incorporated is beyond the scope of the Act and hence, contravenes the provisions of FEMA. 49. Regulation 8 of Schedule 1 of FEM (TISPRO) makes it clear that s .....

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PRO) provides that where shares are not issued within 180 days from the date of receipt of inward remittance, the amount so received shall be refunded to the person concerned. Hence, the payment made to BCCI for consideration for issuance of share is in direct violation of Regulation 8 of schedule 1 of FEM (TISPRO), Regulations, 2000. 50. Regulation 9(i)(A) of schedule 1 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000(TISPR0) de .....

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are not in accordance with the Regulations made by the Reserve Bank of India under the Act. The remittance 1 and remittance 2 were made by the person other than the investor and are in direct contravention of Regulation 5 of FEMA (Permissible Capital Account Transactions) Regulations, 2000. 52. From the perusal of record, It is clear that in the instant matters, there is contravention of the provisions of Section 3 (b) .Section 6(2), 6(3)b & Section 42 (1) of FEMA, 1999 read with Regulation .....

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outside India) Regulations, 2000. We agree with the observations of the Adjudicating Authority expressed in para nos. 73 to m of the Adjudication Order. SCNs 1 to 4 were rightly issued. SCN I was issued to M/s Jaipur IPL Cricket Pvt. Ltd. and who are held liable for contraventions: (i) under section 6(3) (b) of FEMA read with Regulation 5 (1) of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 and para 8 of Schedule 1 thereto read .....

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pital Account Transactions) Regulations. 2000 issued under section 6 (2) of FEMA to the extent of ₹ 9,73,18,034/- and (iii) for contravention of section 6(3) (b) of FEMA read with Regulation 5(1) of Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 and also read with para 9 (1) (A) of Schedule 1 thereto to the extent of ₹ 23,49,27,410.23/- and ₹ 9,73,18,034/- and Mr Ranjit Bharthakur, Mr Raghuram Iyer and Mr Fraser .....

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e extent of ₹ 23,49,.27,410/- and ₹ 8,73,18,034/- totaling to ₹ 33,322,45,444/- and Mr Bishwamath Bachun, Mrs. Sarniia Sivaramen, Mrs. Barbara Jacqueline Hakli and Mr. Manoj Badale, Director of M/s EM Sporting Holdings Ltd. and Shri Suresh Chellaram, Managing Director for above contraventions in terms of section 42 (l)of FEMA, 1999. SCN.III was issued to Mr Manoj Badale and he is held liable for contravention of Section 3 (b) of FEMA to the extent of ₹ 20,19,87,410/- and .....

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rty five lakhs) against all the appellants namely; M/s Jaipur IPL Cricket Pvt. Ltd. as ₹ 32,30,00,000/-(Rs. Thirty two crores thirty lakhs), Mr. Ranjit Barthakur as ₹ 6,40,00,000/- (Rs. Six crores forty lakhs), Mr. Raghuram Iyer as ₹ 5,10,00,000/-(Rs. Five crores ten lakhs), Mr. Fraser Castellino as Rs, 6,40,00,000/- (Rs. Six crores forty lakhs), M/s EM Sporting Holdings Ltd. as ₹ 18,90,00,000/- (Rs. Eighteen crores ninety lakhs),Mr. Bishwarnath Bachun as ₹ 2,45,00, .....

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3 (b),Section 6(2), 6(3)b & Section 42 (1) of FEMA., 1999 read with Regulation 5 (1) of Foreign Exchange Management (Transfer or issue of security by a Person Resident outside India), Regulations, 2000, Paragraph 8 of schedule l of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, Regulation 5 of the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000, and Para 9 (1) (A) of schedule 1 to .....

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India) Regulations, 2000 (TISPRO) withstands judicial scrutiny which is liable to be confirmed and upheld. 54. It is also observed that Foreign Exchange has come in the country and not gone out. There is no allegation of misutilization of funds. There is no loss to exchequer. All remittances were received in India. 55. Taking into consideration all the facts and circumstances of the case, we are of the view that the total penalty amount of ₹ 98,35,00,000/-(Rs.Ninety eight crores thirty fiv .....

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after deduction of 30% becomes ₹ 68,84,50,000/-(Rs. Sixty eight crores eighty four lakhs fifty thousand). The order of the Adjudicating Authority is modified and in the case of JIPL, the amount of penalty imposed by the Adjudicating Authority is reduced from ₹ 32,30;00,000/-(Rs. Thirty two crores thirty lakhs) to ₹ 22,61,00,000/-(Rs. Twenty two crores sixty one lakhs), in the case of Mr. llanjit Barthakur, the penalty amount is reduced from ₹ 6,40,00,000/- (Rs. Six crore .....

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