Waiver of pre-deposit under Section 19(1) FEMA: Tribunal must allow alternative securities when indigence makes cash deposit impossible

When a tribunal finds undue hardship and poor financial condition, treating a statutory 10% ceiling as a mandatory minimum deposit renders the appellate remedy illusory; for an NPA-classified entity with no liquid assets, a multi-million cash deposit is prima facie undue hardship and alternative conditions permitted under the second proviso to Section 19(1) including indemnity bonds or corporate guarantees may be imposed to secure the States interest without depriving the appellant of effective access to appeal; the substantial question is answered in the appellants favour.

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Issues: (i) Whether the Appellate Tribunal, after recording 'undue hardship' and 'poor financial condition', committed a jurisdictional error by treating the 10% limit in the Third Proviso to Section 19(1) of FEMA as a mandatory minimum deposit, thereby rendering the statutory right of appeal illusory.

Analysis: The Tribunal's factual finding of indigence engages the Second Proviso to Section 19(1), which permits the Tribunal to dispense with the deposit where it would cause undue hardship and to impose such conditions as it deems fit to safeguard realisation of penalty. The Third Proviso sets a ceiling (maximum) of ten per cent of the penalty and is not a mandatory floor. Where an appellant is found to be indigent or to be in poor financial condition, the Tribunal must meaningfully exercise its discretion and may adopt alternative mechanisms (for example, indemnity bonds or guarantees) rather than insist on an impossible cash pre-deposit. Treating the 10% cap as a compulsory minimum in the face of an undue hardship finding produces an internal contradiction that undermines the statutory appellate remedy.

Conclusion: The Tribunal committed a jurisdictional error by treating the 10% limit as a mandatory minimum deposit in spite of a finding of undue hardship; this conclusion is in favour of the appellant.

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