2017 (10) TMI 146 - AT - Money Laundering

Appeal allowed due to missing records and lack of proof of service. Penalty order set aside.

Sh. R.V.S. Minhas Versus The Joint Director Directorate of Enforcement, Mumbai

The appeal was allowed as the records were untraceable, and the respondent failed to provide proof of service. The penalty order was set aside, and the ... Contravention of provisions of Section 8(3) & 8(4), 73 read with Section 68 of the Foreign Exchange Regulation Act, 1973 - Held that:- When the matter is taken up today for hearing, the stand of the respondent remains the same that the record is not traceable and counsel requested for an adjournment. The request is opposed by the counsel for the appellant in view of the directions passed by the High Court. He has suggested that without prejudice the impugned order be quashed and the part penalty amount deposited by the appellant be kept by the respondent and appeal be disposed of accordingly. There is a force in the submission of the learned counsel for the appellant. The show cause notice was already issued in 1999. More than 18 years have been passed. Proof of service has not been produced. Even the despite of direction issued by the High Court, the matter is not being heard for the last two years. In the present case admitted by the respondent the record is not traceable, the appeal is accordingly allowed, however as agreed by the appellant that without prejudice, the 10% penalty amount deposit by the appellant be kept by the respondent and the appellant shall not claim the refund of the said amount. The impugned order is set-aside. Issues Involved:1. Applicability of Section 68 of FERA in penalty proceedings under Sections 50 and 51.2. Liability of the appellant as a Director for contraventions by the company.3. Service of notice and opportunity to present the case.4. Delay in filing the appeal and condonation of delay.5. Reconstruction of records and retrial feasibility.Issue-wise Detailed Analysis:1. Applicability of Section 68 of FERA in penalty proceedings under Sections 50 and 51:The appellant argued that Section 68 of the Foreign Exchange Regulation Act (FERA) is not applicable in penalty proceedings under Sections 50 and 51. The appellant contended that the adjudicating officer failed to consider this, and the penalty imposed is legally unjustified. The appellant cited a Division Bench of the High Court of Bombay, which held that Section 68 has no application to adjudication proceedings under the Act.2. Liability of the appellant as a Director for contraventions by the company:The appellant was accused of contravening Sections 8(3) & 8(4) of FERA read with Section 68 due to the company's failure to submit the Exchange Control Copy of the Bill of Entry for imports. The appellant claimed he was not responsible for the day-to-day affairs of the company and had resigned from his directorship before the alleged contraventions. The appellant argued that he did not participate in the company's daily operations and that another individual was responsible for all transactions.3. Service of notice and opportunity to present the case:The appellant asserted that he was never served with any show cause notice or notice for personal hearing, as he had relocated to Malaysia. The service reports indicated that notices were returned undelivered. The appellant only became aware of the penalty upon returning to India. The adjudicating officer proceeded ex-parte and imposed the penalty without the appellant's presence or defense.4. Delay in filing the appeal and condonation of delay:The appeal was initially dismissed by the Appellate Tribunal for being filed beyond the statutory period of limitation. The High Court later condoned the delay, noting that the appellant was not in India and was unaware of the proceedings. The High Court emphasized that the appellant's right to be heard should not be denied on technical grounds and remanded the case back to the Appellate Tribunal for a hearing on merits.5. Reconstruction of records and retrial feasibility:The Enforcement Directorate (ED) failed to provide the necessary documents and proof of service despite multiple directions. The records were declared untraceable. Citing the High Court of Allahabad's judgment in a similar case, the tribunal concluded that the absence of relevant documents and the inability to reconstruct the record made it impossible to decide the appeal on merits. Consequently, the impugned order was set aside, and the penalty amount deposited by the appellant was retained by the respondent without refund.Conclusion:The appeal was allowed due to the untraceable records and the failure of the respondent to provide proof of service. The impugned order imposing the penalty was set aside, and the appellant agreed to forfeit the 10% penalty amount deposited. The case underscores the importance of proper service of notices and the challenges in adjudication when records are missing.