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2020 (3) TMI 1102

..... ery of the goods - goods not released and as such kept in bonded warehouse - defence of the appellant that he could not be made responsible for the stated contravention. For, he became the Managing Director of the Company much later i.e. on 22.10.2001 - HELD THAT:- In the present case, the finding of fact is that the import of goods for which the foreign exchange was procured and remitted was not completed as the Bill of Entry remained to be submitted and the goods were kept in the bonded warehouse and the Company took no steps to clear the same. As a result, Section 10(6) of the FEMA Act is clearly attracted being a case of not using the procured foreign exchange for completing the import procedure. It is also possible to take the view that the Company should have taken steps to surrender the foreign exchange to the authorised person within the specified time as provided in Regulation 6 of the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 (for short, “the FEMA Regulations”) issued by the Reserve Bank of India Contravention referred to in Section 10(6) of the FEMA Act is a continuing actionable offence. If so .....

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..... KHANWILKAR And HON'BLE MR. JUSTICE DINESH MAHESHWARI For the Appellant : Mr. Dinesh Chandra Pandey, AORMr. Alok Kumar, Adv. Ms. Subhangi Tiwari, Adv For the Respondent : Mr. Rupesh Kumar, Adv. Mr. B.K. Prasad Mr. B. Krishna Prasad, AOR JUDGMENT A. M. Khanwilkar, J. 1. This appeal emanates from the complaint proceedings initiated by the adjudicating authority being Deputy Director, Enforcement Directorate Foreign Exchange Management Act, under Section 16(3) of the Foreign Exchange Management Act, 1999 (for short, the FEMA Act ). 2. A show-cause notice dated 19.5.2004 was issued to the appellant, stating that the adjudicating authority was satisfied that there was a prima facie contravention of Section 10(6) of the FEMA Act read with Sections 46 and 47 of the said Act and paragraphs A-10 and A-11 (Current Account Transaction) of the Foreign Exchange Manual 200304 in the complaint filed against the company named M/s. Zoom Enterprises Limited (for short, the Company ) of which, the appellant was the Managing Director. The appellant filed his reply to the said show-cause notice on 10.6.2004, inter alia, contending that the Company had purchased 2 Nos. of Water Cooled Screw Chiller U .....

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..... judicating authority passed the following order: ORDER In view of my above findings, I hold M/s Zoom enterprises Ltd., and their Managing Director Sri Suborno Bose guilty of the charge. In exercise of powers conferred on me under section 13(I) of the Foreign Exchange Management Act, 1999. I impose on them the following amount of penalty. 1) M/s Zoom Enterprise Ltd. ₹ 10,00,000/Rupees Ten Lakhs 2) Sri Suborno Bose ₹ 10,00,000/( Rupees Ten Lakhs) The penalty amount so imposed in terms of the provisions of section 13(I) of the said Act shall be deposited in the office of the Deputy Director, Directorate of Enforcement, Calcutta by cheques/demand draft issued in favour of the Chief Enforcement Officer (Admn.), 3rd M.S.O. Building, 6th floor, C&D Wing, Salt Take, Calcutta 700064 within 45 days from the date of receipt of this order. 4. The Company, as well as, the appellant carried the matter in appeal before the Special Director (Appeals), FEMA & Commissioner of Income Tax, Delhi being Appeal Nos. SD(A)/Kol/04/05/112 and SD(A)/Kol/04/05/113. The appellate authority vide order dated 13.6.2005 dismissed both the appeals and was pleased to uphold the decision of the ad .....

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..... goods so imported and warehoused or for taking necessary extension/approval from RBI/authorized dealer. As far as the change in management of the company is concerned, the change took place in late 2001 but even after the change in management, the then Chairman, Sh. Anirudh Rai Choudhary, remained Director of the new company up to 2004, as is mentioned in the annual report for the year 200304, a copy enclosed with the appeal petition. The Managing Director of the changed company was well aware of the goods so imported and warehoused as a reply were submitted to the Enforcement Authorities as early as in July, 2002. 9. As far as financial constraints are concerned it is seen from the MOU dt. 22.10.2001 that the appellant company was transferred from the old management to the new management after the shares were transferred for about six crores of rupees. From the annual report for the year 200304, it is seen that loans of ₹ 7.33 crores were taken and invested a capital workinprogress shown at ₹ 13.07 crores. The company also advanced ₹ 1.20 crores Substantial investment was made in the capital work including air conditioners, furniture and electrical installation, .....

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..... ined Director of the new company till 2004 as in evident from the annual report for the year 200304. As he was incharge and was responsible for the conduct of business of the company at the time foreign exchange was remitted and goods were imported, he also seems to be responsible for the violation of provisions of FEMA and RBI guidelines supra. The AA may consider initiation of adjudication proceedings against Sh. Anirudh Rai Choudhary. 14. Since the relevant appeals have been decided their applications for stay have become infructuous. The AA is directed to give effect to this order. (emphasis supplied) 5. Being aggrieved, the Company, as well as the appellant carried the matter before the High Court at Calcutta (for short, the High Court ) by way of FEA Nos. 17/2007 and 18/2007. Both appeals were dismissed by the High Court vide judgment and order dated 17.9.2008. It noted the rival submissions and observed thus: After hearing the learned Counsel for the parties and after going through the materials on record placed before us, we are of the opinion that the violation which has been done by the appellant/petitioner, cannot be stated to be a technical violation and it is well-sett .....

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..... rocedure. Ordinarily, the appellant could have been allowed to pursue such argument, but for the dismissal of the special leave petition filed by the Company. In that, consequent to the dismissal of the petition filed by the Company, the finding and conclusion recorded by the adjudicating authority as upheld by the first appellate authority, and of the High Court recording contravention committed by the Company and for which complaint action was just and proper including the imposition of penalty as awarded against the Company and the appellant has attained finality. That cannot be reopened muchless at the instance of the present appellant. This is reinforced by the order issuing notice on the special leave petition filed by the present appellant, dated 30.3.2009. It is indicative of the fact that the contentions specific to absolve the appellant from the complaint action could be examined. 8. In other words, the core issue that needs to be considered in the present appeal is limited to the defence of the appellant that he could not be made responsible for the stated contravention. For, he became the Managing Director of the Company much later i.e. on 22.10.2001. For examining that .....

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..... (2) Notwithstanding anything contained in subsection (1), where a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. Explanation.-For the purposes of this section- (i) company means any body corporate and includes a firm or other association of individuals; and (ii) director , in relation to a firm, means a partner in the firm. A fair reading of Section 10(5) envisages that the authorised person before undertaking any transaction in foreign exchange on behalf of any person, must require that person to make a declaration and to give such information as will reasonably satisfy the authorised person that the transaction will not involve, and is not designated for the purpose of any contravention or evasion of the provisions of .....

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..... purchase or acquisition of foreign exchange is permissible under the provisions of the Act or the rules or regulations or direction or order made thereunder, shall surrender such foreign exchange or the unused portion thereof to an authorised person within a period of sixty days from the date of its acquisition or purchase by him. (2) Notwithstanding anything contained in subregulation (1), where the foreign exchange acquired or purchased by any person from an authorised person is for the purpose of foreign travel, then, the unspent balance of such foreign exchange shall, save as otherwise provided in the regulations made under the Act, be surrendered to an authorised person- (i). within ninety days from the date of return of the traveller to India, when the unspent foreign exchange is in the form of currency notes and coins; and (ii). within one hundred eighty days from the date of return of the traveller to India, when the unspent foreign exchange is in the form of travellers cheques. The appellant has placed reliance on the text of Section 42 of the FEMA Act to bolster his argument that only such person who was in charge of the Company at the time the contravention was committed .....

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..... a given case. (C) If, from the scheme, object and words used in the statute, it appears that the proceedings for imposition of the penalty are adjudicatory in nature, in contradistinction to criminal or quasicriminal proceedings, the determination is of the breach of the civil obligation by the offender. The word penalty by itself will not be determinative to conclude the nature of proceedings being criminal or quasi-criminal. The relevant considerations being the nature of the functions being discharged by the authority and the determination of the liability of the contravenor and the delinquency. (D) Mens rea is not essential element for imposing penalty for breach of civil obligations or liabilities. (E) There can be two distinct liabilities, civil and criminal, under the same Act. As aforementioned, the contravention referred to in Section 10(6) of the FEMA Act is a continuing actionable offence. If so, the Company and the persons managing the affairs of the Company remain liable to take corrective measures in right earnest. Considering the admitted fact that the appellant took over the management of the Company on 22.10.2001 and was fully alive to the default committed by the .....

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..... earnest after his taking over the management of the Company and in particular after becoming aware about the contraventions. The appellant has placed reliance on the dictum of this Court in M/s. Hindustan Steel Ltd. vs. State of Orissa (1969) 2 SCC 627 (paragraph 8). This decision has been distinguished in the case of Shriram (supra) as can be discerned from paragraph 34 of the reported judgment, which reads thus: 34. The Tribunal has erroneously relied on the judgment in Hindustan Steel Ltd. v. State of Orissa, (1969) 2 SCC 627 which pertained to criminal/quasicriminal proceedings. That Section 25 of the Orissa Sales Tax Act which was in question in the said case imposed a punishment of imprisonment up to six months and fine for the offences under the Act. The said case has no application in the present case which relates to imposition of civil liabilities under the SEBI Act and the Regulations and is not a criminal/quasicriminal proceeding. We are in agreement with the view so expressed. 15. To sum up, we hold that no error has been committed by the adjudicating authority in finding that the appellant was also liable to be proceeded with for the contravention by the Company of w .....

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