Tribunal Penalizes Varanasi Branch & Manager for FEMA Violations

The tribunal found both the Varanasi branch and the zonal manager guilty of contravening FEMA provisions. Despite reducing the penalties initially imposed, the tribunal held the appellants liable for penalties under FEMA, 1999 due to unauthorized foreign exchange dealings by the Varanasi branch and the zonal manager's involvement in the transaction.

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Issues:
1. Whether the appellants contravened provisions of Section 3(a), Section 4, and Section 10(4) of FEMA, 1999.
2. Whether the Varanasi branch of the company and the zonal manager are liable for penalties under FEMA, 1999.

Analysis:
1. The appellants contended that the Varanasi branch had the RBI's license, but it was later found that the branch did not have a valid license at the relevant time. They argued that the transactions were based on a letter dated 02.01.2007, which was later alleged to be forged. The appellants also claimed that the adjudicating authority did not investigate the role of the other party involved in the transaction. They cited legal judgments to support their arguments. However, the tribunal found that the Varanasi branch undertook foreign exchange dealings without authorization, contravening Section 3(a) of FEMA, 1999.

2. In the case of the zonal manager, it was argued that he acted in good faith based on information provided by a state head regarding the availability of foreign currency. The zonal manager approved the transaction after verifying the empanelment of the other party. It was later revealed that the other party was not authorized by the RBI for foreign exchange dealings. The zonal manager denied direct involvement and argued that there was no evidence against him except for a statement by another employee. The tribunal, however, found emails indicating the zonal manager's knowledge and involvement in the transaction, holding him liable under Section 42(2) of FEMA.

3. The respondent argued that the company and its branches are collectively responsible, emphasizing that the company benefited from the illegal transaction. The company's decision to file a criminal complaint against its employees indicated acknowledgment of FEMA violations. Regarding the zonal manager, the respondent pointed to evidence suggesting direct involvement and knowledge of the transaction. The tribunal concurred, holding both the Varanasi branch and the zonal manager liable for penalties under Section 13 of FEMA, 1999.

In conclusion, the tribunal found both the Varanasi branch and the zonal manager guilty of contravening FEMA provisions. While reducing the initially imposed penalties, the tribunal held the appellants liable for penalties under FEMA, 1999 due to unauthorized foreign exchange dealings and the zonal manager's involvement in the transaction.

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