2002 (12) TMI 663 - AT - FEMA

Tribunal Overturns Penalties for Non-Remittance, Grants Benefit of Doubt Due to Potential Ignorance of Legal Duties.

Rilvan Leathers Versus Director of Enforcement

Rilvan Leathers Versus Director of Enforcement - TMI Issues:1. Imposition of penalty under section 18(2) and 18(3) of FERA for non-remittance of amount under LC.2. Duty of the Union Bank of India as Holders in due course.3. Interpretation of law regarding the obligation to institute legal proceedings by the Union Bank of India.4. Ignorance of legal position by the appellant.5. Failure of the Adjudicator to address all relevant issues.Analysis:1. The appeals were filed against the penalty imposed by the Additional Director, Enforcement Mumbai for contravention of section 18(2) and 18(3) of FERA due to non-remittance of the amount under LC. The firm and its partners were penalized for not collecting the outstanding amount in the LC opened by a foreign buyer, leading to the contravention of FERA provisions.2. The Union Bank of India, as Holders in due course, was expected to take appropriate steps for the realization of the amounts due under the LC. The appellant argued that the blame should fall on the bank for not initiating proceedings against the foreign buyer's bank, thereby absolving the appellants of any wrongdoing. The appellant contended that the bank's failure to act should not result in penalizing the firm for non-remittance.3. The Tribunal disagreed with the interpretation of law by the Adjudicator regarding the obligation of the Union Bank of India to institute legal proceedings. It was noted that the exact nature of the controversy between the exporter and the foreign buyer was not clear, and the foreign buyer might have been justified in instituting legal action. Therefore, it was deemed inappropriate to hold the bank liable for not filing a suit on behalf of the appellant.4. Considering the appellant's potential ignorance of the legal position and belief that the bank should have taken necessary steps for recovery of dues, the Tribunal acknowledged the argument presented by the appellant's counsel. It was recognized that the appellant might not have been fully aware of their legal responsibilities in the situation.5. The Tribunal criticized the Adjudicator for not addressing all relevant issues comprehensively and for placing the entire blame on the appellant without considering various aspects of the case. The Tribunal concluded that the appellant should be given the benefit of the doubt and exonerated from the charges, even if there was a technical violation. As a result, the appeals were allowed, and the impugned order imposing penalties was set aside.