2009 (7) TMI 772 - HC - Companies Law

Petitioners' Penalty Relief Request Modified by Court

Nitin Ramniklal Shan Versus Special Director

The petitioners challenged the Appellate Tribunal for Foreign Exchange's order rejecting their applications for dispensation of penalty pre-deposits under ... Restrictions on payments Issues:1. Challenge to the order of the Appellate Tribunal for Foreign Exchange rejecting applications for dispensation of pre-deposits of penalty amounts.2. Allegations of violating provisions of the Foreign Exchange Regulation Act, 1973.3. Claim of entitlement to protection under specific Acts and Schemes.4. Non-speaking nature of the impugned order by the Appellate Tribunal.5. Offer to deposit part penalty amount and furnish security for recovery of demand.Analysis:1. The petitioners challenged the order of the Appellate Tribunal for Foreign Exchange, which rejected their applications for dispensation of pre-deposits of penalty amounts imposed on them under the Foreign Exchange Regulation Act, 1973. The petitioners, Mr. Nitin Ramniklal Shah and Mr. Mahesh Ramniklal Shah, sought relief from the penalty amounts of Rs. 5,00,000 and Rs. 5,20,000, respectively.2. The allegations against the petitioners included purchasing NRI cheques from a third party after paying substantial consideration, thereby violating provisions of section 9(1)(d) of the Act. It was contended that the petitioners did not qualify for protection under the Remittance of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991, and Remittances in Foreign Exchange (Immunities) Scheme, 1991.3. The counsel for the petitioners argued that the impugned order by the Appellate Tribunal lacked reasoning and failed to address the contentions raised by the petitioners. Reference was made to a past order by the Foreign Exchange Regulation Appellate Board, where penalty orders in similar circumstances were quashed, suggesting inconsistency in decisions.4. During the proceedings, the petitioners expressed readiness to deposit a partial amount of the penalty and provide security in the form of immovable property to safeguard the interests of the respondents and ensure recovery of the demanded sum in case of an adverse ruling. The petitioners committed to depositing Rs. 3 lakhs and furnishing suitable security within a specified timeframe.5. As part of the resolution, the petitioners agreed to file an affidavit detailing their bank accounts and immovable properties with the Directorate of Enforcement. Upon compliance with the payment and security requirements, the attachment orders on their bank accounts would be lifted. The modification of the impugned order allowed for the disposal of the appeal on its merits, emphasizing that the Court's decision did not reflect any opinion on the appeal's substance.In conclusion, the writ petition was disposed of, outlining the steps to be taken by the petitioners to address the penalty issue and comply with the directives set forth by the Court.