2026 (1) TMI 860 - AT - FEMA

Joint bank account used for repeated illegal foreign-exchange deposits; holder held liable but penalty mitigated, banks fined

Dominant issue: Whether a joint account holder is liable under s.8(1) FERA for repeated illegal foreign-exchange deposits. Reasoning: Tribunal found no ... Violation of Section 8(1) of FERA - Liability of joint account holder - Appellant not receive the copy of the SCN, as well as that of the Call Notices for personal hearing - Due diligence and caution expected of authorised dealers - Service by affixation under Rule 10(c) of Adjudication and Appeal Rules, 1974 - Penalty under Section 50 of FERA - Exchange Control Manual guidelines - HELD THAT:- We find that the Respondent Directorate has informed of the service of the notices through affixation on the property in Rajouri Garden, New Delhi, in accordance with Rule 10 (c) of Adjudication and Appeal Rules, 1974 r/w (3) & (4) of Section 49 of FEMA, as per Panchnama drawn at the last known address on 01.07.2004 and 12.07.2004. We also infer even from the pleadings of the Appellant that the property in Rajouri Garden, New Delhi continues to be owned by the Appellant. In view of this, we are unable to appreciate that why the Appellant could not have the necessary arrangement in place for communication of the notices addressed to her or to her Late Husband. In any case she is not prejudiced by the delayed communication of the Impugned Order, as the delay has been condoned. There is nothing on record to show that she was the active participant in the said violation. Even the submissions of the BOB did not specify that the pay-in-slips were bearing her signature as deposit holder. However, the repeated use of the two accounts which she jointly held with her Late Husband for the purpose of illegal deposits of foreign exchange cannot be ignored. It is also buttressed from the fact that the noticee banks did not exercise due caution and diligence and have been penalized. In view of the facts and the circumstances of the present case, the ends of justice will be met on reduction of penalty on the Appellant. Thus, we partly allow the Appeal. Issues: (i) Whether penalty imposed for contravention of Section 8(1) of FERA on the Appellant is justified and, if so, whether the quantum of penalty requires modification.Analysis: The Appellant jointly held two NRE accounts in which repeated deposits of foreign exchange were made in amounts below US$10,000 across 1992-1994. Transaction patterns, absence of documentation proving that the foreign exchange was brought from abroad, and bank records showing frequent deposits supported a finding of acquisition of foreign exchange without prior permission. The service of show-cause notices and call notices by affixation at the last known address was recorded. The Appellant's contention of lack of knowledge of transactions was weighed against her status as joint account-holder and the failure of banks to exercise due diligence; the banks were also held liable on the facts. The Tribunal found that, while violation of Section 8(1) of FERA was established, there was no material to show active participation by the Appellant in the contraventions at the same degree as the primary noticee.Conclusion: (i) Penalty for breach of Section 8(1) of FERA is established against the Appellant but the quantum is reduced. The Appeal is partly allowed by reducing the penalty on the Appellant to Rs. 3,00,000/-.