2012 (5) TMI 69 - HC - FEMA

Court modifies Tribunal's order, requires 60% penalty deposit within 4 weeks. Predeposit waiver not granted.

Rajkumar Shivhare Versus Union of India

The court held that no case was made out for a complete waiver of the predeposit requirement. However, considering the circumstances, the court modified ... Tribunal dismissed the stay Petition for waiver of predeposit of penalty in FEMA appeal – unauthorizedly receipt of payments amounting to Rs.5 Crores on the instructions of persons resident outside India. - Held that:- No case was made out by the Appellant for a complete waiver of the requirement of predeposit under the second proviso to sub section (1) of Section 19 - Tribunal had directed the Appellant to deposit the penalty within thirty days failing which it was stated that the Appeal would stand dismissed - the Appellant had filed writ proceedings before the Delhi High Court and in an appeal therefrom to the Supreme Court under Section 35 - an extension of time of four weeks from the date of order should be granted to the Appellant to affect deposit. Issues Involved:1. Dismissal of stay petition for waiver of predeposit of penalty.2. Violation of principles of natural justice.3. Undue hardship in the context of predeposit requirements.4. Prima facie case evaluation.5. Financial hardship consideration.Detailed Analysis:1. Dismissal of Stay Petition for Waiver of Predeposit of Penalty:The Appellant challenged the dismissal of their stay petition for waiver of predeposit of penalty by the Appellate Tribunal for Foreign Exchange. The Tribunal had directed the Appellant to deposit the entire penalty amount of Rs. 2 Crores. The Appellant argued that this direction was disproportionate and arbitrary, effectively depriving them of the right to appeal.2. Violation of Principles of Natural Justice:The Appellant contended that they were denied the right to cross-examine a witness whose statement was recorded by the Enforcement Directorate. This, according to the Appellant, constituted a violation of the principles of natural justice. The Special Director had rejected the Appellant's plea to cross-examine the witness, stating that the Appellant had been given an opportunity to comment on the statement.3. Undue Hardship in the Context of Predeposit Requirements:The Appellant argued that the requirement to deposit the full penalty amount caused undue hardship. The court noted that under Section 19(1) of the FEMA, the Tribunal has the discretion to waive the predeposit requirement if it causes undue hardship, which includes both a prima facie case and financial hardship.4. Prima Facie Case Evaluation:The court evaluated whether the Appellant had made out a prima facie case. The Appellant's statements, recorded on eight different occasions, detailed their involvement in the betting business and the receipt of Rs. 5 Crores through hawala channels. The court found that these statements, corroborated by documentary evidence and the statement of the conoticee, prima facie supported the adjudicating officer's findings.5. Financial Hardship Consideration:The Appellant claimed financial hardship but failed to produce specific material evidence before the Tribunal to support this claim. The court emphasized that the onus lies on the Appellant to provide documentary material to establish financial hardship.Conclusion:The court held that no case was made out for a complete waiver of the predeposit requirement. However, considering the circumstances, the court modified the Tribunal's order, directing the Appellant to deposit 60% of the penalty amount within four weeks. The court clarified that its observations were confined to the application for predeposit and would not affect the independent evaluation of the merits in the appeal. The appeal was disposed of with no order as to costs.