1989 (7) TMI 349 - AT - FEMA

Tribunal Rules in Favor of Appellant: No Violation of Foreign Exchange Regulation Act Found in Successful Appeal.

R.R. Holdings (P.) Ltd. Versus Director of Enforcement

The tribunal allowed the appeal, determining that the appellant did not contravene Sections 8(1), 14, or 47 of the Foreign Exchange Regulation Act, 1973. ... - Issues Involved:1. Contravention of Section 8(1) of the Foreign Exchange Regulation Act, 1973.2. Contravention of Section 14 of the Foreign Exchange Regulation Act, 1973.3. Contravention of Section 47 of the Foreign Exchange Regulation Act, 1973.Detailed Analysis:1. Contravention of Section 8(1):The core issue was whether the appellant had 'otherwise acquired' or 'transferred' any amount of foreign exchange to another person not being an authorized dealer in foreign exchange, thus contravening Section 8(1) of the Act. The appellant, RR Holdings (P.) Ltd., entered into an agreement with Sumitomo Corporation (SC) where the commission was to be held by Allied Petro Agencies Inc. (APA) in London until the completion of the contract. The adjudicating officer initially found that the appellant had acquired the foreign exchange when SC remitted the commission to APA's account. However, the tribunal concluded that the appellant only had a contingent right to the foreign exchange, which materialized only after SC issued a no-objection certificate. Therefore, the appellant did not acquire or transfer foreign exchange in contravention of Section 8(1).2. Contravention of Section 14:The issue here was whether the appellant, having lawfully acquired the foreign exchange, failed to offer it for sale to an authorized dealer within the prescribed time, thus contravening Section 14 of the Act. The tribunal determined that the appellant's right to the foreign exchange arose only in August 1987 when SC confirmed the completion of the contract. The foreign exchange was remitted to India within five days of this confirmation, well within the three-month period prescribed by Section 14. Consequently, the tribunal found no contravention of Section 14.3. Contravention of Section 47:The question was whether the agreement between the appellant and SC evaded the operation of Section 8(1) and/or Section 14 of the Act, thus violating Section 47. The adjudicating officer had concluded that the agreement directly evaded the provisions of Section 8(1) and Section 14. However, the tribunal, having found no contravention of Sections 8(1) and 14, determined that Section 47 was also not violated. The tribunal emphasized that the agreement did not intend to evade the provisions of the Act but was a legitimate business arrangement.Conclusion:The tribunal allowed the appeal, concluding that the appellant did not contravene Sections 8(1), 14, or 47 of the Foreign Exchange Regulation Act, 1973. The charges against the appellant were not substantiated, and the appeal was successful.