Tribunal Upholds RBI Violations, Eases Property Confiscation

The tribunal upheld penalties for violating RBI regulations and the delay in filing the FC-GPR report by M/s. True Axiz Resorts Pvt. Ltd. and Mr. Leonid Beyzer. However, it set aside the confiscation of properties, deeming it excessive, subject to compliance with other laws and pending RBI permissions. The tribunal also found Mr. Beyzer not in contravention of prior approval requirements for investment due to holding only one share in another company. Regarding the acquisition of agricultural land, the tribunal clarified that possessing agricultural land was not prohibited under FDI regulations as long as the appellants did not engage in agricultural activities.

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Issues Involved:
1. Mode of remittance for foreign direct investment (FDI).
2. Delay in filing the FC-GPR report.
3. Requirement of prior approval from the Government of India for investment.
4. Acquisition of agricultural land under FDI regulations.

Detailed Analysis:

1. Mode of Remittance for Foreign Direct Investment (FDI):
The appellants, M/s. True Axiz Resorts Pvt. Ltd. and Mr. Leonid Beyzer, were charged with contravening RBI regulations by using an NRO account for FDI instead of an NRE/FCNR account. The legal requirement, as per Notification No. 20/2000-RB and Schedule 1 of Regulation 5(1) of the Foreign Exchange Management (Transfer or issue of Security by a person resident outside India) Regulations, 2000, mandates that the payment for shares must be made through inward remittance via normal banking channels or by debit to an NRE/FCNR account. The appellants admitted that the sum of Rs. 33,10,000/- was transferred from Mr. Beyzer's NRO account to the company account, which was deemed a breach of the legal requirements. Hence, the adjudicating authority's order was upheld.

2. Delay in Filing the FC-GPR Report:
The appellants failed to file the FC-GPR report within the stipulated 30 days from the date of issue of shares. The Reserve Bank of India acknowledged the filing of the applications in Form FC-GPR but did not grant final clearance. The appellants argued that the delay was due to their unfamiliarity with English and was a bona fide mistake. However, the tribunal found that the appellants had not complied with the mandatory requirement, and the charge against them stood.

3. Requirement of Prior Approval from the Government of India for Investment:
Mr. Leonid Beyzer was charged with not obtaining prior approval from the Government of India despite having an investment in another company in the same sector, contravening Regulation 5, Paragraph 1 (2) of Schedule 1 of the FEMA Regulations. The tribunal found that the regulation applies only when a person proposes to be a collaborator or to acquire the entire shareholding of a new Indian company. Since Mr. Beyzer held only one share, the tribunal rejected the impugned order to this extent and found the appeal valid.

4. Acquisition of Agricultural Land under FDI Regulations:
The appellants were charged with acquiring agricultural land, which is prohibited for FDI under the automatic route as per Annexure A to Schedule 1 of FEMA Notification No. 20/2000-RB. The tribunal noted that what is prohibited is the activity of agriculture, not the mere possession of agricultural land. The appellants were licensed to undertake tourism-related activities, and there was no allegation of them indulging in agricultural activities. Therefore, the tribunal found no contravention regarding the properties in question under the specific notification. However, it noted that compliance with local laws and land revenue codes must be ensured, which is beyond the scope of FEMA.

Conclusion:
The tribunal upheld the penalties imposed for the violation of RBI regulations and the delay in filing the FC-GPR report. However, it set aside the confiscation of properties, deeming it too harsh, subject to compliance with other relevant laws and pending RBI permissions.

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