1996 (2) TMI 609 - AT - FEMA

Penalty Reduced for Violation of Foreign Exchange Regulation Act; Consideration Given to Mitigating Factors.

Usman Ibrahim Umarjee Versus Director of Enforcement

The Tribunal partially allowed the appeal, maintaining the contravention charge under section 9(1)(b) of the Foreign Exchange Regulation Act, 1973, but ... - Issues:1. Imposition of penalty under section 9(1)(b) of the Foreign Exchange Regulation Act, 1973.2. Request for adjournment due to religious observance and health reasons.3. Challenge to the imposition of penalty based on lack of wilful default and technical breach.4. Waiver of pre-deposit requirement and decision to dispose of the appeal without hearing the appellant.5. Reference to legal cases supporting the argument that contravention was technical.6. Explanation by the appellant regarding the receipt and use of the amount received.7. Initiation of action based on information from another case of havala payments.8. Consideration of circumstances in determining penalty and criticism of the basis for penalty calculation.9. Plea of absence of mens rea and ignorance of law.10. Assessment of excessive penalty and mitigation of culpability.11. Decision to sustain the contravention charge but reduce the penalty amount.12. Final order reducing the penalty and setting a deadline for payment.Analysis:1. The judgment deals with an appeal against the imposition of a penalty under section 9(1)(b) of the Foreign Exchange Regulation Act, 1973. The appellant was penalized for receiving a payment from an unknown person on behalf of individuals resident in the United Kingdom, which was deemed a contravention of the Act.2. The appellant requested an adjournment citing religious observance and the ill health of their advocate. However, the Tribunal decided to proceed without the appellant's presence, given the nature of the challenge to the penalty imposition.3. The appellant contested the penalty on grounds of lack of wilful default, conscious involvement, or deliberate defiance of the law, arguing that it was a technical breach. The Tribunal noted the appellant's stance and waived the pre-deposit requirement due to the absence of a dispute regarding the contravention.4. The Tribunal chose to dispose of the appeal without hearing the appellant in person or through an advocate, considering the appellant's detailed submissions challenging the penalty imposition.5. The appellant referenced legal cases to support the argument that the contravention was merely technical, emphasizing mitigating factors such as the charitable use of the received amount.6. The appellant explained that the received amount was for a community welfare project and was used for charitable purposes, attributing the offense to ignorance of the law and committing not to repeat the mistake.7. The action against the appellant stemmed from information related to havala payments, but the Tribunal found the appellant's explanations and actions, such as acknowledging the receipt and depositing the amount in the Society's accounts, significant in assessing the penalty.8. Criticism was directed at the basis for calculating the penalty, which considered the source of the payment rather than the appellant's direct involvement and actions related to the received amount.9. The appellant's pleas of absence of mens rea and ignorance of the law were addressed, with the Tribunal concluding that these factors did not absolve the appellant of the contravention.10. Despite acknowledging mitigating circumstances, the Tribunal found the penalty excessive, leading to a decision to reduce it based on the specific circumstances of the case.11. The Tribunal sustained the contravention charge but reduced the penalty amount significantly, taking into account the appellant's knowledge of the transaction and the benefit derived by the Society.12. The final order partially allowed the appeal, reducing the penalty from Rs. 60,000 to Rs. 10,000 and providing a deadline for payment, failing which the respondents could recover the amount through legal means.