Unauthorized Payments Violate FERA: Penalty Reduced 50% Amid Arguments of Technical Violations Without Mens Rea.

Tamil Nadu Indutrial Guidance & Report Promotion Bureau (GUIDANCE) Versus Director Enforcement Directorate

Tamil Nadu Indutrial Guidance & Report Promotion Bureau (GUIDANCE) Versus Director Enforcement Directorate - TMI Issues:
Violation of provisions of Section 9(1)(d) r/w 68(1) of the Foreign Exchange Regulation Act, 1973.

Analysis:
1. The appeals were filed against an Adjudication Order imposing penalties for contravention of FERA provisions. The appellants made partial payment as per Tribunal's order.

2. The charge was for making unauthorized payments to M/s. DFCL on behalf of M/s. Image Securities LLC without RBI permission. The appellants sought consultancy services for NRI investment promotion in Tamil Nadu.

3. Evidence showed no substantial service by M/s. DFCL, and incriminating documents were found during a search. Payments were made to DFCL on behalf of Image Securities LLC without RBI approval.

4. The defense argued the payments were independent, not violating FERA. However, evidence indicated a connection between DFCL and Image Securities LLC, with payments made for services not rendered.

5. Section 9(1)(d) of FERA prohibits payments to persons outside India without RBI permission. The new agreement with DFCL was an attempt to circumvent legal obligations.

6. Confessional statements and documents proved the connection between DFCL and Image Securities LLC, despite attempts to argue independence.

7. The Memorandum of Understanding between DFCL and Image Securities LLC couldn't override FERA provisions. Payments were made for services by Image Securities LLC, not DFCL.

8. The manager of DFCL's statements confirmed the appellants' involvement in unauthorized payments for services not rendered.

9. The defense claimed technical violation without mens rea, citing a Supreme Court judgment. However, penalties apply regardless of intention for contraventions of statutory obligations.

10. Despite income tax deductions, the evidence established a violation of FERA provisions. The appellants were found guilty, but the penalty amount was reduced by 50% for fairness.

In conclusion, the appellants were found guilty of contravening FERA provisions by making unauthorized payments. The defense arguments were refuted based on evidence, leading to a partial reduction in the penalty amount imposed. The judgment emphasized strict compliance with regulatory mechanisms under FERA, even in cases of technical violations without mens rea.