Company penalized Rs. 32 lakh for unauthorized UK payments without RBI permission under FERA 1973

The Appellate Tribunal under SAFEMA upheld contraventions under FERA 1973 against the appellant company and three individual appellants. The company made unauthorized payments to a UK-based entity without RBI permission, using bank drafts purchased from Punjab Sindh Bank and State Bank of India. The tribunal found the appellants' conduct contumacious, rejecting their defense that they were not responsible for currency conversion. Penalties were imposed totaling Rs. 32,00,000 on the company and Rs. 8,00,000 on each individual appellant, with pre-deposits adjusted against the penalty amounts.

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Issues Involved:
1. Contravention of Section 9(1)(a) of FERA 1973.
2. Contravention of Section 64(2) of FERA 1973.
3. Contravention of Section 9(1)(c) of FERA 1973.
4. Liability of individual Appellants under Section 68(1) of FERA 1973.

Summary:

Contravention of Section 9(1)(a) of FERA 1973:
The Appellant Company, M/s UK Paints (India) Ltd., was charged u/s 9(1)(a) of FERA 1973 for making payments of Rs. 36,96,443/- and Rs. 47,38,500/- to a person resident outside India without general or special permission from RBI. The Tribunal found that the Appellant Company effected the payment to M/s Eastern Suburbs Ltd. (ESL) in contravention of Section 9(1)(a) of FERA 1973 by purchasing bank drafts and handing them over to Shri Ravi Singhal, which were later credited to the non-resident convertible rupee account of ESL.

Contravention of Section 64(2) of FERA 1973:
The Appellant Company was charged u/s 64(2) of FERA 1973 for abetment in contravention of Section 8(1) of FERA 1973. The Tribunal held that the Appellant Company and its officials were directly involved in making payments to ESL in contravention of Section 9(1)(a) of FERA 1973, leading to the acquisition of foreign exchange by ESL. Thus, the charge of abetment under Section 64(2) for contravention of Section 8(1) could not hold good.

Contravention of Section 9(1)(c) of FERA 1973:
The Appellant Company was further charged u/s 9(1)(c) of FERA 1973 for acknowledging a debt of Rs. 1,15,58,232/- to ESL without general or special exemption from RBI. The Tribunal found that the acknowledgment of debt by the Appellants, evident from the settlement of accounts for two bills, amounted to contravention of Section 9(1)(c) of FERA 1973. The charge under Section 9(1)(c) stood proved against the Appellant Company and its officials.

Liability of Individual Appellants under Section 68(1) of FERA 1973:
The three individual Appellants, being President, Sr. Vice-President, and Director of the Company, were charged u/s 68(1) of FERA 1973 for the contraventions committed by the Company. The Tribunal held that the individual Appellants had significant roles in the contraventions and failed to prove that they exercised due diligence to prevent such contraventions. Therefore, they were held liable for the contraventions u/s 68(1) of FERA 1973.

Conclusion:
The Tribunal upheld the penalties imposed on the Appellants for contraventions of Section 9(1)(a) and Section 9(1)(c) of FERA 1973, while setting aside the penalties for contraventions of Section 8(1). The total penalty on the Appellant Company was fixed at Rs. 32,00,000/- and Rs. 8,00,000/- on each of the three individual Appellants. The pre-deposit made by the Appellants was adjusted towards the penalty. The Appeals were partly allowed and disposed of accordingly.

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