2024 (7) TMI 425 - AT - FEMA

ED's revision petition dismissed for lack of territorial jurisdiction over Dubai company and time-barred filing

The Appellate Tribunal under SAFEMA dismissed ED's revision petition seeking to remand the case for fresh proceedings against a company. The tribunal held ... Offences under FEMA - Liability of the person-in-charge of the company - investment in Forex Trading Bitcoins were traded in terms of USD - seized Indian Currency to Rs. 1,97,03,000/- seized from the possession of the appellants was also confiscated to Central Govt. Account in terms of Section 13(2) of the FEMA, 1999. HELD THAT:- We are not satisfied with the contention of Ld. Counsel for the appellant ED to remand back the case for initiating fresh proceedings against the present respondents, along with M/s Ambidant Marketing Pvt. Ltd.due to following reasons: (1) As per record, show cause notice was issued to respondents, but no notice was issued to M/s Ambidant Marketing Pvt. Ltd. by the Enforcement Directorate for the purpose of adjudication and the said show cause notice is not challenged till date, for not impleading the said company as noticee. Similarly, no Complaint is filed by Deputy Director ED, before the Adjudicating Authority, by impleading M/s Ambidant Marketing Pvt. Ltd. as necessary notice/defendant no.3. The present revision petitions are not maintainable, in absence of any SCN and complaint against the said company. Hence, it was the duty of the appellant ED to file the revision at the initial stage when no complaint is filed against the said company and thereafter, when the show cause notice was issued only to the directors of the said company, but not to their company M/s Ambidant Marketing Pvt. Ltd. After adjudication by the Adjudicating Authority and the passing of the impugned order, appellant ED is not empowered to agitate this issue at belated stage. (2) Even otherwise, appellant ED has not impleaded M/s Ambidant as necessary party/contesting respondent in the present Revision Petition. Hence, no adverse order can be passed in absence of impleading the said company as respondent. (3) Moreover, from the impugned order, it appears that the said M/s Ambidant Marketing Pvt Ltd is incorporated at Dubai, and thus, Appellant ED and Adjudicating Authority cannot exercise its territorial jurisdiction over the said company. Even otherwise, the alleged contravention was committed by the present respondents in individual capacity. (4) Moreover, the Indian Currency seized by the Officers of ED from the residential premises of Shri Sayed Fareed Ahmed, is already stands confiscated to the Central Government u/s 13(2) of FEMA, 1999. The question of remanding back the case for imposing penalty on M/s AmbidantMarketing Pvt. Ltd. does not arise. (5) There is nothing on record that ED is able to recover the penalty amount from the present respondents till date, as per impugned order. The present whereabouts of respondents is not traceable and it will be a futile exercise to impose additional penalty on the company. (6) Further, appellant ED has not disclosed whether the said company incorporated in Dubai is still working or stands liquidated. Appellant ED has also not disclosed the registered address in the record of Registrar of Companies at Dubai, if the said company is still working. (7) It is pertinent to mention here that this type of Revisions and Appeals for enhancement, without realising the penalty as per impugned order, in absence of operation of any stay of the impugned order, appears to be an indirect attempt to favour the noticees’ to gain time to deposit penalty after second round of litigation, and/or to deplete the chances of recovery in future. Hence, such type of litigation by appellant ED needs to be deprecated and focus be made for realisation of the penalty amount. (8) Even otherwise, the impugned order was passed on 27.03.2018, whereas SCN was issued on 26.02.2018, but the present revision petition is filed on 04.02.2019, i.e. after more than ten months, without any reasonable explanation of delay. Hence, this revision petition also needs to be dismissed being time barred. Issues Involved:1. Imposition of penalties under various sections of FEMA, 1999.2. Seizure and confiscation of Indian currency.3. Non-issuance of show cause notice to the company.4. Territorial jurisdiction over the company incorporated in Dubai.5. Recovery of penalty amounts.6. Timeliness and maintainability of the revision petition.Detailed Analysis:1. Imposition of Penalties:The Adjudicating Authority imposed penalties on Shri Syed Afaq Ahmed for contravening sections 6(3)(a), 6(3)(d), and 4 of FEMA, 1999, along with relevant regulations. Specifically, penalties included:- Rs. 8,00,000 for contravening Section 6(3)(a) for the subscription of 49% equity shares in a foreign entity.- Rs. 25,00,000 for contravening Section 6(3)(d) related to borrowing and lending in foreign exchange.- Rs. 2,00,000 for contravening Section 4 concerning foreign currency accounts by a resident in India.Shri Syed Fareed Ahmed was penalized Rs. 1,50,00,000 for contravening Sections 3(a) and 4 of FEMA, 1999, related to forex derivative contracts.2. Seizure and Confiscation of Indian Currency:The seized Indian currency amounting to Rs. 1,97,03,000 was confiscated to the Central Government account under Section 13(2) of FEMA, 1999. This amount was seized from the possession of the appellants during searches conducted at their premises.3. Non-issuance of Show Cause Notice to the Company:The appellant ED argued that the company, M/s Ambidant Marketing Pvt. Ltd., was not issued a show cause notice, nor was it impleaded as a noticee, which is mandated under Section 42 of FEMA. The Adjudicating Authority failed to charge the company while charging its directors, which was contrary to the legal position established by the Supreme Court in cases like State of Madras v. CV Parekh and Aneeta Hada v. Godfather Travels and Tours (P) Ltd.4. Territorial Jurisdiction Over the Company Incorporated in Dubai:The Tribunal noted that M/s Ambidant Marketing Pvt. Ltd. is incorporated in Dubai, and thus, the ED and Adjudicating Authority cannot exercise territorial jurisdiction over the company. The alleged contraventions were committed by the respondents in their individual capacities.5. Recovery of Penalty Amounts:There was no evidence on record that the ED had recovered the penalty amounts from the respondents as per the impugned order. The current whereabouts of the respondents were not traceable, making it a futile exercise to impose additional penalties on the company.6. Timeliness and Maintainability of the Revision Petition:The revision petition was filed more than ten months after the impugned order without any reasonable explanation for the delay, rendering the petition time-barred. The Tribunal dismissed the revision petitions on these grounds, emphasizing that such litigation appears to indirectly favor the noticees by delaying the penalty payment.Conclusion:The present revision petitions were dismissed as devoid of merits. The Tribunal highlighted the procedural lapses, lack of jurisdiction over the Dubai-based company, and the untimely filing of the petition. The focus was urged to be on the realization of penalty amounts rather than engaging in protracted litigation. The order was pronounced on June 25, 2024.