TMI Blog2020 (1) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... d 20-2-2017. The Court has perused the communications of the Enforcement Directorate which are addressed to the Special Director, Directorate of Enforcement, Western Region, Mumbai, which refer to the proceedings of justification to the export obligation by the petitioner regarding cut and polished diamond under three separate purchase contracts. As the Court is not entering into the merits of the impugned decision, no further reference is made to such communication, leaving it upon respondent No. 2, in exercise of powers under sub-rules (1) and (2) to take a decision after affording an opportunity of hearing to the petitioner to contend that the so called proceedings of the Enforcement Directorate are not pertaining to the transaction in question. After hearing the petitioner, it is open for respondent No. 3 to take a decision in accordance with law. The impugned communication dated 24-5-2017 is set aside accordingly. Respondent No. 3 is directed to take a fresh decision in accordance with law, particularly follow requirement of sub-rule (2) of Rule 8 of the Rules. The petition stands allowed to the aforesaid extent. Rule is made absolute. - R/Special Civil Application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernational FZC. It is submitted that in view of the aforesaid letter, purchase Contract No. PI /FSPL/205, dated 12-9-2009 was being entered between the petitioner company and one M/s. Palms International FZC on the terms and conditions mentioned therein. 4.2 It is submitted that in view of the aforesaid purchase Contract No. PI/FSPL/205, dated 12-9-2009 and as per the advice of the overseas buyer, the petitioner company on 10-10-2009 vide Invoice No. FFR/RXP/001/09-10, dated -7-11-2009 sent the consignment of 80,400 pcs. of ready-made garments for a total amount of USD 5,70,840 to M/s. Palms International FZC, UAE. The shipping documents pertaining to the said exports were submitted to the Kalupur Commercial Cooperative Bank Limited, i.e. the authorised dealer which were accordingly adjusted against the advanced money received to the tune of USD 5,89,880 by issuing Letter No. HO/IBBD/2009-10, dated 11-11-2009. 4.3 It is submitted that thereafter, as per the directions of the overseas buyer, the petitioner company entered into a purchase contract No. TS/FFR/01-09/10, dated 2-11-2009 with one M/s. World Link International FZC of UAE for exporting 5,90,000 pcs. of Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... To comply with the said contract and looking towards the past record of the overseas buyer, without requesting for the advance money, during the period 7-7-2011 to 15-7-2011, the applicant made investment of ₹ 4,41,30,493/- and purchased cut and polished diamond from M/s. Maruti Enterprises. 4.7 It is submitted that pursuant to the aforesaid contract, the petitioner company exported cut and polished diamond amounting to USD 9,08,919.50 in three different consignments bearing Invoice Nos. /FFR/B/DMD/01-2011-12, dated 18-7-2011, FFR/B/DMD/02-2011-12, dated 22-7-2011 and FFR/B/DMD/03-2011-12, dated 3-8-2011. 4.8 It is submitted that in view of the aforesaid circumstances, the petitioner had to comply with Regulation 16 of FEMA and for that reason, sought permission from RBI to send export document directly to overseas buyer and fulfill his export obligations. Such request was denied by RBI by letter dated 25-10-2011 on the ground that investigation is undertaken by the Directorate of Enforcement, Ahmedabad. 4.9 It is submitted that the petitioner addressed letters dated 15-7-2013 and 19-11-2013 to respondent No. 2-RBI for regularizing export done to o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t even if any proceedings under the Act are initiated against the petitioner or his directors and if the same are not pertaining to the very transaction, still, proviso will not be applicable to the facts of the present case. Hence also, the case of the petitioner deserves consideration. 5. As against this, Learned Advocate for the respondent-RBI submitted that the amendment, adding proviso to sub-rule (2) of Rule 8 of the Rules will apply in full force to the facts of the present case. He placed reliance on the judgment of Division Bench of the Bombay High Court in case of New Delhi Television Limited v. Reserve Bank of India Ors. , reported in - 2018 SCC Online Bom. 1309, to submit that in identical set of circumstances, the Bombay High Court has given a decision that it is not open for the RBI to adjudicate upon the decision taken by the Enforcement Directorate to initiated proceedings against the party under the provisions of the Act. He also relied upon judgments of the Apex Court in cases of Tikaram Sons Ltd. v. Commissioner of Sales Tax, UP, reported in AIR 1968 SC 1286, Gurbachan Singh v. Satpal Singh Ors., reported in AIR 1990 SC 209, United Bank of India, C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned decision is taken on 24-5-2017, wherein it is communicated to the petitioner as under :- 2. In this connection, please refer to the proviso to Rule 8(2) of the FEM (Compounding Proceedings) Rules, 2000, which states that any proceeding initiated under Rule 4, if the DoE is of the view that the said proceedings relates to a serious contravention suspected of money-laundering, terror financing or affecting sovereignty and integrity of the nation, the compounding authority shall not proceed with the matter and shall remit the case to the appropriate Adjudicating [Authority] for adjudicating contravention under Section 13 . The Directorate of Enforcement, Mumbai has since informed us that proceedings have already been initiated under PMLA Act, 2002, against your organization and its three directors, and hence they have strong objection against entertaining any compounding application from your organization and/or its directors. We are, therefore, constrained to return your compounding application together with all related documents and compounding application fees. 3. Further, the compounding application fee received with the above application has been credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to a serious contravention suspected of money-laundering, etc., the compounding authority is not to proceed with the matter and to remit the case to the appropriate adjudicating authority for adjudicating contravention. Without entering into the issue of retrospective applicability of the amended sub-rule (2), on the ground of statutory requirement of providing an opportunity of hearing, the Court is inclined to consider the case of the petitioner. The contention of Learned Advocate for the respondent-RBI that with the coming into force of the amended proviso to sub-rule (2), moment the Enforcement Directorate communicated information about existence of serious proceeding under the Prevention of Money-laundering Act, 2002, jurisdiction of the RBI to exercise its power to compound would cease. This contention cannot be upheld as the amended proviso to sub-rule (2) does not in any way affect obligation of the respondent-RBI under sub-rule (2) to take a decision after providing an opportunity of hearing. When the information is brought to the notice of the RBI, before remitting the case to the appropriate adjudicating authority under the amended proviso, exercise of taking decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 or Rule 5 in writing, to the notice of the Adjudicating Authority and on such notice of the compounding of the contravention being given, the person in relation to whom the contravention is so compounded shall be discharged. Rule 8, after its amendment reads as under :- 8. Procedure for compounding. - (1) The compounding authority may call for any information, record or any other documents relevant to the compounding proceedings. (2) The compounding authority shall pass an order of compounding after affording an opportunity of being heard to all the concerned as expeditiously as possible and not later than 180 days from the date of application : Provided that with respect to any proceeding initiated under Rule 4, if the Enforcement Directorate is of the view that the said proceeding relates to a serious contravention suspected of Money-laundering, terror financing or affecting sovereignty and integrity of the nation, the compounding authority shall not proceed with the matter and shall remit the case to the appropriate Adjudicating Authority for adjudicating contravention under Section 13. 77. A bare perusal of Rule 8, therefore, would ind ..... X X X X Extracts X X X X X X X X Extracts X X X X
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