2025 (6) TMI 123 - AT - FEMA

Appeal dismissed for failing to deposit required Rs. 25 lakhs under section 52 pre-deposit conditions

Shri Kamlesh Shah Versus The Special Director Directorate of Enforcement, Mumbai

Shri Kamlesh Shah Versus The Special Director Directorate of Enforcement, Mumbai - TMI The core legal questions considered by the Appellate Tribunal under SAFEMA in this matter are:1. Whether the appeal filed under section 52 of the Foreign Exchange Regulation Act, 1973 (FERA) can be maintained without satisfying the condition of pre-deposit of the penalty imposed under section 50 of the Act.2. Whether the delay in filing the appeal and non-compliance with the pre-deposit condition can be condoned or waived, particularly in light of the appellant's plea of ignorance of the order and inability to deposit the full amount.3. Whether partial deposit of the penalty amount can be accepted to satisfy the pre-deposit condition under section 52 of FERA.4. Whether the Restoration Application filed after dismissal of the appeal for non-compliance with the pre-deposit condition merits consideration and allowance.Issue-wise Detailed Analysis:1. Maintainability of Appeal Without Pre-Deposit Under Section 52 of FERAThe relevant legal framework is section 52 of the Foreign Exchange Regulation Act, 1973, which mandates that any appeal to the Appellate Board against an order imposing penalty under section 50 must be accompanied by deposit of the penalty amount. The statute provides that the appeal shall not be entertained unless the appellant deposits the sum imposed by way of penalty, subject to the Board's discretion to waive or dispense with such deposit if it causes undue hardship.Precedents and statutory interpretation confirm that the pre-deposit condition is mandatory for maintainability of the appeal, except where the Board exercises its discretion to waive the deposit. The Tribunal's order dated 04.04.2024 explicitly required the appellant to deposit Rs. 25 lakhs within 30 days failing which the appeal would stand dismissed. This order was consistent with the legal mandate under section 52.The appellant failed to comply with this condition within the stipulated time frame. The Tribunal, therefore, rightly dismissed the appeal on 31.07.2024 for non-compliance. The Court emphasized that the appeal is not maintainable without satisfying the pre-deposit condition, and this principle was applied strictly to uphold the statutory requirement.2. Consideration of Delay and Waiver of Pre-Deposit ConditionThe appellant contended that the order dated 04.04.2024 was not available online and that there was a mistake in recording the date, leading to ignorance of the requirement to deposit within 30 days. The appellant sought sympathetic consideration for condonation of delay and waiver of the pre-deposit condition.Section 52 provides that the Appellate Board may entertain appeals beyond the prescribed 45-day period up to 90 days if sufficient cause is shown for the delay. Additionally, the Board may waive the pre-deposit if it causes undue hardship. However, the Court found that the appellant did not satisfy the condition of pre-deposit and did not file the restoration application promptly after dismissal. The appellant's ignorance of the order and delay in knowledge of the dismissal were not accepted as sufficient cause to extend time or waive the deposit.The Tribunal noted that the appeal had remained pending for nearly 28 years with intermittent proceedings, and the appellant had been given opportunities to comply with the pre-deposit condition. The Court rejected the plea of ignorance and delay as inadequate to override the statutory mandate.3. Partial Deposit of Penalty AmountThe appellant requested permission to deposit a partial amount of Rs. 5 lakhs instead of the full Rs. 25 lakhs as pre-deposit, seeking an extension of eight weeks to make such deposit.Section 52 of FERA does not provide for partial deposits to satisfy the pre-deposit condition. The Tribunal held that the request for partial payment is not permissible under the statute. The provision clearly requires deposit of the sum imposed by way of penalty or such amount as the Board may direct. The Board's order had already reduced the amount from the total penalty to Rs. 25 lakhs, which was to be deposited in full within 30 days.The Court underscored that allowing partial deposits would contravene the statutory scheme and undermine the purpose of the pre-deposit condition. Hence, the request was rejected as inadmissible.4. Restoration Application After Dismissal of AppealThe appellant filed a Restoration Application seeking revival of the appeal after its dismissal for non-compliance with the pre-deposit condition. The appellant claimed unawareness of the dismissal date and sought restoration on the basis of the inability to comply with the deposit condition.The Tribunal reiterated that restoration of an appeal dismissed for non-compliance with a mandatory statutory condition is contingent upon the appellant fulfilling that condition. Since the appellant had not deposited the required amount, the appeal was not maintainable, and restoration could not be allowed.The Court also clarified that no order of restoration had been passed earlier, contrary to the appellant's submission. The appeal was only posted for hearing of the restoration application, which was ultimately dismissed.The Tribunal emphasized that restoration cannot be granted as a matter of course but only on strict compliance with statutory provisions. The failure to deposit the pre-deposit amount within the prescribed time and the absence of any valid explanation for the delay led to dismissal of the restoration application.Significant Holdings:'The appeal under section 52 of Foreign Exchange Regulation Act, 1973 can be maintained after depositing the penalty imposed under section 50 of the Act.''The request of the counsel for the appellant is not admissible to seek deposit of the amount towards the condition of pre-deposit in parts. It is not so provided under section 52 of the Act of 1973.''In view of the aforesaid the interest of justice will be served if the Appellant deposits Rs. 25,00,000 (Rupees Twenty Five Lakhs Only) out of the total penalty imposed on him. The Appellant shall make the aforementioned pre-deposit within 30 days of the order failing which the Appeal shall stand dismissed.''Unless the condition of pre-deposit under section 52 is satisfied, the appeal cannot be heard on merit.''The appeal is not maintainable and thus rightly dismissed by the Tribunal and accordingly we do not find force in the application for Restoration of the Appeal despite the default in complying the condition of pre-deposit given under section 52 of the Act of 1973.'The Tribunal established the core principle that compliance with the pre-deposit condition under section 52 of FERA is mandatory for maintainability of appeals against penalty orders. The discretion to waive or dispense with the deposit is limited and must be exercised strictly. Partial deposits are impermissible. Restoration of appeals dismissed for non-compliance with pre-deposit conditions is contingent upon fulfillment of those conditions. Ignorance of orders or delay in knowledge does not constitute sufficient cause to condone delay or waive statutory requirements.