2018 (7) TMI 447 - HC - FEMA

High Court directs deposit of 10% penalty without guarantee in appeals; non-compliance leads to dismissal. Appeals expedited post deposit.

Abdul Sagir (Ex-Non Exe. Director) Mrugank Investments Ltd., Rahis Ahmed (Ex-Non Exe. Director) Tirumala Impex Pvt. Ltd., Versus Special Director of Enforcement

The High Court varied the impugned order and directed the appellants to deposit 10% of the penalty amount within four weeks, without the requirement of ... Arguable case - Deposit 10% of the penalty amount imposed by the Adjudicating Authority alongwith reliable guarantee for balance 90% for the purposes of entertaining Appellant's appeals on merits - Held that:- In the facts of this case after having come to conclusion that the Appellants have an arguable case, the deposit of 10% of the penalty amount in each of the Appeals would meet the ends of justice. This further requirement of furnishing reliable guarantee for balance 90% is not called for in the facts of the present case. This is particularly so as the impugned order finds that the affidavit filed pleading financial hardship was uncontroverted. We vary the impugned order dated 25.6.2015 and direct the Appellants to deposit 10% of the penalty amount as directed by the Tribunal within a period of four weeks from today, with the Tribunal. The requirement of providing reliable guarantee is done away with. In case the Appellants fail to deposit 10% of the penalty amount as directed by the impugned order of the Tribunal within a period of four weeks from today, the Tribunal would be at liberty to dismiss the appeals for non-deposit of penalty amount (excluding the reliable guarantee) as directed by impugned order dated 29.6.2015. Issues:Appeals challenging order under Foreign Exchange Management Act, 1999 regarding pre-deposit of penalty for entertaining appeals on merits.Detailed Analysis:The High Court heard appeals under Section 35 of the Foreign Exchange Management Act, 1999, challenging an order passed by the Appellate Tribunal for Foreign Exchange. The impugned order dated 29.6.2015 dispensed with the requirement of pre-deposit of penalty imposed for the purpose of entertaining appeals from the common orders of the Special Director under the Act. The key question raised in all these appeals was whether the Tribunal was justified in directing the appellants to deposit 10% of the penalty amount imposed by the Adjudicating Authority along with a reliable guarantee for the balance 90% for the purposes of entertaining the appeals on merits. The appellants had filed appeals from the order of the Special Director imposing penalties upon them for breaching Section 8 of the Act by exporting goods without taking steps to realize the export proceeds.The Tribunal, after considering the appellants' case on merits and their financial difficulties in depositing the penalty amounts, found that the appellants had an arguable case. Therefore, the Tribunal directed the deposit of 10% of the penalty amount imposed by the Special Director, along with a reliable guarantee for the balance 90% of the penalty. The High Court varied the impugned order and directed the appellants to deposit 10% of the penalty amount within four weeks, without the requirement of providing a reliable guarantee. It was emphasized that failure to deposit the 10% of the penalty amount within the stipulated time would lead to the dismissal of the appeals by the Tribunal.The High Court noted that the pending appeals had not been dismissed by the Tribunal due to the filing of the present appeals. It was decided that the appeals should be taken up expeditiously after the deposit of the penalty amount as directed by the High Court. Ultimately, all the appeals were disposed of in the above terms, with no order as to costs.