2017 (11) TMI 618 - AT - FEMA

Tribunal overturns penalty, drops charges against Appellant in successful appeal. No costs awarded.

The Tribunal set aside the impugned order, recalling the penalty imposed on the Appellant and dropping all charges against him. The appeal was allowed, ... Non-realisation of export sale proceeds - Proceedings as contemplated under Section 18(2) & 18(3) read with Section 68(1) & 68(2) of FERA - Held that:- It is evident that the Appellant joined as Director solely in the capacity of advisory role and was specifically excluded from the day to day operations of the company as evidenced from the correspondence. There cannot be any adverse inference against the Appellant‟s role as to its involvement in the exports or realization of the proceeds. Unless country is established particularly when Noticee No. 14‟s being not above suspicion has been given the benefit and no penalty imposed upon him. Rule of equality would apply in this matter. Discrimination of the department cannot be accepted. The impugned order deals with the violations committed by the persons in charge of MVR Group of companies. The Appellant was neither part of the management managing the affairs of the MVR group of companies nor was he in any way concerned with the company. This fact has been clearly acknowledged by the Adjudicating Authority while passing the impugned order. Yet the Adjudicating Authority chooses to impose the penalty on the Appellant. Having found nothing against the Appellant, the Adjudicating Authority ought not to have imposed the penalty. In the impugned order the Adjudicating Authority found nothing against the Appellant, however, the Special Director observes erroneously that the Appellant ought to have exercised due diligence in knowing the details of the company and his responsibilities which he failed to do so and thereby rendered himself responsible to the non-realisation of export sale proceeds and thus contravened the provisions of Section 18(2) & 18(3) of FERA.The impugned order suffers from legal infirmities and the same is liable to be set aside. Issues involved:- Appeal under Section 19 of the Foreign Exchange Management Act, 1999 against an order passed by the Adjudicating Authority.- Allegations of breach of Sections 18(2) and 18(3) of FERA against the Appellant.- Imposition of penalty on the Appellant for alleged contravention of FERA provisions.- Comparison with another Noticee and allegations of discriminatory treatment.- Exoneration of another Noticee while imposing penalty on the Appellant.- Legal infirmities in the impugned order and the need for setting it aside.Detailed Analysis:1. The Appellant filed an appeal under Section 19 of the Foreign Exchange Management Act, 1999 against an order passed by the Adjudicating Authority. The appeal was based on various grounds challenging the imposition of a penalty on the Appellant for alleged violations of FERA provisions.2. The Appellant, a former Director in a company, received a Show Cause Notice regarding non-receipt of export proceeds. The Appellant's role was limited to an advisory capacity, and he was not involved in day-to-day operations or transactions related to the alleged violations.3. Despite being a Director for a short period, the Appellant acted diligently by seeking information on any FERA violations upon joining and resigned due to lack of board meetings and health reasons. The Appellant cooperated with authorities and was not implicated in any wrongdoing.4. A comparison was drawn with another Director (Noticee No. 14) who was exonerated by the Special Director due to a short tenure and lack of involvement in export transactions. The Appellant's situation was deemed better as he exercised due diligence upon assuming the Directorship.5. The Adjudicating Authority imposed a penalty on the Appellant despite finding no evidence of his involvement in the alleged violations. The Appellant was excluded from day-to-day operations and had no role in the export transactions in question.6. Legal infirmities in the impugned order were highlighted, pointing out discriminatory treatment and erroneous observations by the Special Director regarding the Appellant's responsibilities. The order was deemed unjust and set aside, dropping all charges against the Appellant.7. The Tribunal set aside the impugned order, recalling the penalty imposed on the Appellant and dropping all charges leveled against him. The appeal was allowed, and no costs were awarded.This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive overview of the case and the Tribunal's decision.