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of <h1>10% pre-deposit u/s19(1) challenged as rendering appeal illusory when going-concern at stake; appeals allowed, threshold modified</h1> Whether dismissal for non-compliance with the 10% pre-deposit under s.19(1) violated the undue hardship doctrine: HC held that the Tribunal failed to ... Undue hardship doctrine - non-compliance with the pre-deposit requirements - right of appeal - invoking the second proviso to Section 19(1) - Whether the Ld. Tribunal was legally justified in dismissing the appeals for non-compliance with the 10% pre-deposit condition, or whether such a dismissal, in the face of a specific plea of financial incapacity and a communication gap with counsel, offends the principles of natural justice and the right to a forum ? - HELD THAT:- In our view, the Learned Tribunal failed to balance the mandate of Section 19(1) with the 'undue hardship' doctrine. When a party alleges that their very existence as a 'going concern' is at stake, the Tribunal must look beyond mere non-payment and examine if the 10% condition had effectively rendered the statutory right of appeal illusory. We are equally cognizant of the need to 'safeguard the realization of penalty' as required by the proviso. The Revenue’s interest cannot be jeopardized by indefinite delays. However, a dismissal on technicalities in a matter involving such high stakes—without a hearing on merits—is a result that this Court finds difficult to sustain. The right of appeal is a substantive statutory right. While the Revenue’s interest in safeguarding the penalty is legitimate, the doors of justice cannot be bolted solely due to a temporary liquidity crisis. Considering the substantial questions of law involved, we find that a further modification of the pre-deposit threshold is necessary to prevent a miscarriage of justice and to ensure that the appellants are not rendered remediless. Accordingly, the appeals are disposed of. Issues: (i) Whether the Appellate Tribunal was justified in dismissing the appeals for non-compliance with the 10% pre-deposit condition under Section 19(1) of FEMA, notwithstanding the appellants' plea of financial incapacity and a communication breakdown with counsel.Analysis: The statutory framework of Section 19(1) contains a proviso permitting the Tribunal to dispense with or modify the deposit requirement if deposit would cause 'undue hardship'. Undue hardship is a jurisdictional fact requiring assessment of the appellant's financial burden together with prima facie merits. A tribunal must balance the necessity to safeguard realization of penalty against the risk of rendering the statutory right of appeal illusory. Where a party alleges insolvency or that the pre-deposit would imperil its existence as a going concern, the tribunal should inquire into the proportionality of the deposit and the merits rather than dismissing the appeal purely on technical non-compliance. Additionally, a temporary communication breakdown with counsel should not automatically result in loss of the right to be heard.Conclusion: The dismissal for non-compliance with the 10% pre-deposit condition was unjustified. The pre-deposit requirement is modified to specified fixed sums and the appeals are restored for merit hearing upon compliance; the appellants therefore succeed on the limited challenge to the dismissal.
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