TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Seizure of two demat accounts u/s37A: substitution by equivalent fixed deposit allowed subject to lien and final adjudication</h1> Dominant issue: whether seizure of two demat accounts under s.37A (contravention of s.4 of the Act of 1999) could be equitably substituted by a fixed ... Seizure of Demat accounts u/s 37A - contravention of Section 4 of the Act of 1999 - furnishing a Fixed Deposit (FD) of equivalent value - incriminating documents seized from the residential premises - artificial juridical person - failed to provide proper explanation for the said foreign exchange - HELD THAT:- We, find an observation favourable for sympathetic consideration of the case of the appellants. It is for the reason that the respondents are required to secure the equivalent amount in India and accordingly they could seize two Demat Accounts. It could have been even the FDs if it would have been existing at the relevant time for the equivalent value. The purpose of the seizure is to secure the equivalent sum to the amount alleged in contravention of the Act of 1999. Thus, we do not find request of the appellants to be unjust, rather it is equitable for both the parties. If the FD of equivalent amount is taken, then it would secure the seized amount and if the appellants approach the RBI for compounding, then it would remain subject to the outcome of the order thereupon. The result of the order for substitution would allow the appellants to seek compounding. Generally, compounding is sought when the contravention alleged against the person is not challenged but a prayer is made to compound the contravention. Thus, the prayer for such a relief cannot be said to be unjust and otherwise if the compounding is not permitted, the amount under seizure would exist though with substitution of the fixed deposit of the equivalent value. Accordingly, we pass the following equitable order. The seizure of two Demat Accounts is substituted with the Fixed Deposit of equivalent amount to be furnished by the appellants and the said FD would remain subject to the final outcome of the adjudication proceedings and if the appellants approach RBI for compounding, then subject to the outcome of the order passed therein. The amount equivalent to the value of the shares in Demat Accounts would get secured with the aforesaid. The order aforesaid has been passed after taking into consideration the observation of the Commissioner of Customs (Appeals) for sympathetic consideration of the request of the appellants and accordingly, with the aforesaid, the appeals are disposed of with lifting of the seizure of Demat accounts under Section 37A of the Act of 1999 but on furnishing the FD of the equivalent amount, with lien of the respondents. Issues: Whether the seizure of two Demat accounts under Section 37A of the Foreign Exchange Management Act, 1999 may be substituted by furnishing a Fixed Deposit (FD) of equivalent value, with lien in favour of the respondent, pending adjudication and subject to any compounding by the Reserve Bank of India.Analysis: The Tribunal examined the limited relief sought by the appellants without adjudicating the merits of the alleged contravention under Section 4 of the Act. The competent authority below had confirmed the seizure but observed that it lacked jurisdiction to order substitution of seized items; it nonetheless recommended sympathetic consideration of substitution. The Tribunal noted the purpose of seizure under Section 37A is to secure an equivalent sum in India and that a Fixed Deposit existing for equivalent value would serve the same protective purpose while preserving parties' rights in pending adjudication and any RBI compounding process. The Tribunal considered potential volatility in share values and the equitable interests of both parties, and restrained from pronouncing on substantive guilt or penalty which remain for adjudication under Sections 13 and 16 of the Act.Conclusion: The seizure of the two Demat accounts is substituted by an FD of equivalent value of Rs. 30,60,11,193/- furnished by the appellants with a lien in favour of the respondents; the seizure of the Demat accounts is lifted subject to the final outcome of the adjudication proceedings and any order on compounding by the Reserve Bank of India.
TaxTMI 
TaxTMI 
