2025 (3) TMI 66 - HC - FEMA

FERA proceedings are adjudicatory not criminal; tribunal cannot declare persons 'guilty' of offences

Y.S. Chowdary, Sujana Steels Ltd. And S.T. Prasad Versus Enforcement Directorate

Delhi HC held that proceedings under FERA are adjudicatory, not criminal in nature. The Appellant Tribunal for Foreign Exchange functions as a ... Penalty imposed for contraventions u/s 8(3) and 8(4) of FERA -person “guilty” of offences under the FERA Act - HELD THAT:- Proceedings under the FERA Act are not criminal proceedings but are adjudicatory in nature. Appellant Tribunal for Foreign Exchange is an adjudicatory body, which performs quasi-judicial functions and act as administrators and adjudicators. They are not ‘courts’. While it is very much within their powers, to impose penalties for non-compliance of provisions of FERA, however, it does not lie within their domain to pronounce a person “guilty” of offences under the FERA Act. Pronouncing a person “guilty” has serious consequences and to adjudicate and give a finding of ‘guilty’ lies within the exclusive domain of the competent courts of jurisdiction. In this view of the matter, the penalty imposed by the Appellant Tribunal for Foreign Exchange on the appellants is upheld, however, the word “guilty” used in the entire order 02.06.2016 against the appellants is to be considered as “redacted”. The issues presented and considered in this judgment involve challenges to an order passed by the Appellate Tribunal for Foreign Exchange, New Delhi in relation to violations of the Foreign Exchange Regulation Act, 1973 (FERA). The core legal questions revolve around the imposition of penalties on M/s Sujana Steel Ltd. and its officials for contraventions under sections 8(3) and 8(4) of FERA. The main issue analyzed is whether the use of the term 'guilty' by the Appellate Tribunal is appropriate in the context of FERA violations, considering the nature of the proceedings as adjudicatory rather than criminal.The Court's detailed analysis delves into the legal framework and precedents, particularly referencing the judgment in Director of Enforcement vs. M.C.T.M. Corporation Pvt. Ltd., which clarifies the distinction between criminal proceedings and adjudicatory actions under FERA. The Court emphasizes that the proceedings under FERA are not criminal in nature but are aimed at determining civil obligations and imposing penalties for non-compliance.Key evidence considered includes the facts surrounding SSL's remittance of funds to Techno Imports and Exports, Dubai, without actual importation of materials, leading to penalty imposition by the Special Director, ED. The Court reviews the arguments presented by the appellants' counsel regarding the use of the term 'guilty' and the vicarious liability of the officials.The Court interprets the Appellate Tribunal's decision to uphold the penalties but redact the term 'guilty' as a recognition of the distinction between adjudicatory proceedings and criminal convictions. The judgment underscores that finding someone 'guilty' carries significant implications and should be reserved for criminal courts, not administrative bodies like the Appellate Tribunal for Foreign Exchange.In conclusion, the Court allows the appeals to the extent of redacting the term 'guilty' from the Appellate Tribunal's order, thereby affirming the penalties imposed while clarifying the nature of the proceedings under FERA. The judgment establishes the principle that pronouncing guilt is beyond the purview of adjudicatory bodies under FERA and reiterates the quasi-judicial nature of such proceedings.Overall, the Court's decision provides clarity on the legal interpretation of FERA violations, the role of adjudicatory bodies, and the appropriate terminology to be used in such proceedings, ensuring a fair and accurate application of the law in cases of non-compliance with foreign exchange regulations.