2019 (1) TMI 980 - AT - FEMA

Tribunal Stays Penalty in FEMA Case, Cites RBI Permissions and Legal Precedents

Google India Pvt. Ltd., Kent Walker, Hari Raju Mahadevu, Lloyd Hartley Martin Versus The Special Director Directorate of Enforcement, Chennai

The Tribunal granted a stay on the penalty imposed by the Adjudicating Authority under FEMA regulations, pending appeal. It found no violations of FEMA ... Stay of penalty imposed - Contravention and allegations against the appellant u/s 6(3)(d) of FEMA - penalty imposed - delay in settlement of import dues - Held that:- The Appellants have prima facie demonstrated that there have been no violations of the provisions of FEMA, the Rules, Regulations and the Master Circular on Imports. Without prejudice to any of the aforesaid, and assuming without admitting that there was a violation, even then the RBI regularized the same by granting the permissions to settle the dues specifically from “FEMA Angle”. The Appellant has also able demonstrated the factual conditions which led to the delay in settlement of import dues. The RBI letter expressly states that the permission was issued from foreign exchange angle under FEMA. The limitation of the permission was only in respect of any other applicable laws other than FEMA. The Respondent is admittedly not seeking to impose penalty for alleged violation of any other law. In view of the aforesaid, the contentions of the Respondent especially at Para 16 are unsustainable. In this regard, the submissions of the Appellants in their Appeals, Stay Applications and the common Synopsis are reiterated. Prima facie it is of the view that the respondent has no jurisdiction to reinterpret the terms of the agreement between Google Ireland and Google India. Undue hardship that will be caused to the Appellants if they are made to make a deposit of any part of their respective penalty which is without basis in law and in any event highly disproportionate to the bona fide actions of the Appellants. In the present case, the RBI has specifically allowed the settlement of dues from FEMA angle In the light of the prima facie has been made by the appellant and the appellant will suffer hardship if the appellant is asked to deposit the penalty amount. After having through the facts and material placed on record, I am of the opinion that the chances of success of appeal are more than the failure of appeal. Thus, the prayer is allowed. M.P is disposed of. There shall be a stay of operation of the impugned order till the final decision of appeals. Issues:Appeal against impugned order under FEMA for contravention of regulations, penalty imposition, stay application for waiver of pre-deposit, jurisdiction of RBI, delay in settlement of import dues, violation of FEMA provisions, undue hardship, interpretation of agreements, validity of penalty amount, relevance of previous legal decisions.Analysis:1. The appeals were filed against an order alleging contravention of FEMA regulations, resulting in a penalty imposed by the Adjudicating Authority. The appellant sought a stay on the penalty pending appeal.2. The respondent accused the appellants of violating FEMA provisions and imposed penalties on the company and its directors. The appellant argued that the transactions in question did not involve borrowing or lending in foreign exchange under FEMA.3. The appellant contended that the delay in settling dues to Google Ireland and Google USA was due to genuine reasons and had been regularized by permissions granted by the RBI. The respondent opposed the delay and insisted on dealing with the breach of FEMA provisions.4. The appellant highlighted that the RBI had jurisdiction over foreign exchange remittances and had granted permissions after due diligence, ensuring no pecuniary gain or violations of FEMA provisions.5. The appellant emphasized the undue hardship they would face if required to deposit the penalty amount, citing legal precedents supporting their claim of irregularities in the impugned order.6. The Tribunal found that the appellant had demonstrated no violations of FEMA provisions and that the delay in settlement had been regularized by RBI permissions, leading to a stay on the operation of the impugned order pending final hearing.7. Legal arguments were made regarding the jurisdiction of the RBI, interpretation of agreements, relevance of previous legal decisions, and the disproportionate nature of the penalty imposed, supporting the appellant's plea for a stay on the penalty.This detailed analysis covers the various legal issues raised in the judgment, including the interpretation of FEMA provisions, the role of the RBI, the regularization of delays in settlement, undue hardship faced by the appellant, and the validity of the penalty imposed.