2001 (7) TMI 1332 - AT - FEMA

Tribunal Overturns Rs. 25 Lakh Penalty for Bank Manager, Citing Lack of Evidence in Foreign Exchange Regulation Case.

Rakesh Malhotra Versus Special Director, Enforcement Directorate

The Tribunal set aside the adjudication order against the appellant, a Senior Manager at a bank, who was penalized Rs. 25 lakhs for alleged contravention ... - Issues: Appeal against Adjudication Order imposing penalty under Foreign Exchange Regulation Act, 1973. Dispensation of pre-deposit of penalty. Interpretation of abetment under section 64 of the Act.Analysis:1. The appeal was filed against a common Adjudication Order dated 30-3-2001, imposing a penalty of Rs. 25 lakhs for contravention of the Foreign Exchange Regulation Act, 1973. The appellant, an employee of a bank branch not directly dealing with foreign exchange, argued that he had fulfilled his duties appropriately, and the penalty was too high for him to pre-deposit. The Tribunal, after considering the circumstances, waived the pre-deposit of the penalty amount to proceed with the appeal on merits.2. The matter was taken up for final hearing after dispensation of the pre-deposit. The respondent's counsel contended that the appeal should be heard together with other appeals arising from the same adjudication order. However, as it was uncertain if other appeals were filed, the Tribunal decided to proceed with the appellant's appeal alone to avoid unnecessary delay.3. The appellant, a Senior Manager at a bank branch, was accused of contravening the Act by recommending discounting a bill without the necessary conditions being met. The appellant's counsel argued that the adjudication order lacked evidence against the appellant and was passed without proper application of the law.4. The respondent's counsel contended that the appellant's recommendatory action amounted to abetment, citing a violation of the Exchange Control Manual. However, the Tribunal found that the contents of the letter alone did not establish abetment, as the recipient of the letter had a duty to exercise due diligence. Without evidence of conspiracy or instigation, the appellant could not be held liable for abetment.5. The Tribunal concluded that the appellant's conduct did not violate the provisions of the Foreign Exchange Regulation Act, 1973. Therefore, the findings in the adjudication order against the appellant were set aside, and the appellant succeeded in the appeal. The Tribunal refrained from discussing collateral propositions to avoid influencing other appeals related to the same adjudication order.