2008 (9) TMI 1042 - AT - FEMA

Tribunal Upholds Penalty for Director Over Unrecovered Export Proceeds, Dismisses Appeal on Fraudulent Signature Claims.

Anil Bhalla Versus Directorate of Enforcement

The Tribunal dismissed the appeal, upholding the penalty imposed under FEMA and FERA for non-realization of export proceeds amounting to Rs. 2,36,35,851. ... - Issues:1. Imposition of penalty under FEMA and FERA for non-realization of export proceeds.2. Time limitation for initiating adjudication proceedings under FERA and FEMA.3. Burden of proof in cases of fraudulently obtained signatures.4. Obligations of a director in realizing outstanding export proceeds.5. Interpretation of Sections 18(2) and 18(3) of FER Act, 1973.6. Standard of reasonableness in efforts to realize export proceeds.7. Director's responsibility in company transactions.8. Quantum of penalty for non-compliance with export proceeds regulations.Analysis:1. The judgment involves an appeal against a penalty imposed for contravention of FEMA and FERA provisions due to non-realization of export proceeds. The appellant, a director of the company, was held responsible for the outstanding dues amounting to Rs. 2,36,35,851 from exports made by the company in 1997. The appellant argued that his signatures were obtained fraudulently and that he was not involved in the day-to-day business of the company.2. The appellant raised a defense based on the time limitation for initiating adjudication proceedings under FERA and FEMA. However, the Tribunal found that the proceedings were initiated within the prescribed period as per the relevant Acts, dismissing the appellant's argument regarding the time-barred nature of the proceedings.3. The burden of proving that the signatures were obtained fraudulently rested on the appellant. Despite claiming mental health issues and fraudulent activities by others, the appellant failed to provide sufficient evidence to support his assertions, leading to the rejection of his defense on this ground.4. As a director of the company during the relevant period, the appellant was obligated to take reasonable efforts to realize the outstanding export proceeds. The Tribunal noted that the appellant's resignation after the export transactions did not absolve him of this responsibility, especially considering the substantial amount involved.5. The judgment delved into the interpretation of Sections 18(2) and 18(3) of the FER Act, 1973, highlighting the obligations and presumptions regarding the realization of export proceeds within the prescribed period. The Tribunal emphasized that the presumption under Section 18(3) is rebuttable, but the appellant failed to prove sincere efforts to repatriate the export proceeds.6. The standard of reasonableness in efforts to realize export proceeds was discussed, emphasizing that the appellant's lack of demonstrable efforts led to the conclusion that he had not met the prescribed legal duty as an exporter to make reasonable attempts to recover the outstanding dues.7. The judgment underscored the director's responsibility in company transactions, emphasizing that directors are exclusively empowered to manage company affairs and are responsible for such management. The appellant's claim of being ignorant of the export transactions was refuted based on his role as a director during the relevant period.8. Finally, the Tribunal upheld the quantum of penalty imposed on the appellant, considering the gravity of the offense and the substantial amount involved. The appellant was directed to deposit the penalty amount within a specified timeframe, failing which the respondent could recover the same in accordance with the law. The appeal was dismissed based on the findings and analysis presented in the judgment.