Pre-deposit relief under FEMA penalty challenge: Tribunal discretion upheld, but deposit condition further reduced in the interests of justice.

The second proviso to Section 19 allows dispensation of penalty pre-deposit only where undue hardship is shown, subject to conditions the Appellate Tribunal considers fit. Here, the Tribunal had already exercised that discretion by reducing the deposit requirement to 10% of the penalty, and the challenge to the petitioners' prima facie case did not justify interference under the narrow scope of Article 227. The High Court found no infirmity in the Tribunal's approach, but further modified the pre-deposit condition in the interests of justice by reducing it to 5% of the penalty, with the balance to be secured by bank guarantee or surety to the Tribunal's satisfaction.

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Issues: Whether the Appellate Tribunal's order directing partial pre-deposit of penalty under the Foreign Exchange Management Act, 1999 called for interference, and whether the pre-deposit condition required modification.

Analysis: The second proviso to Section 19 permits dispensation of penalty pre-deposit only in a particular case where undue hardship is shown, subject to conditions the Appellate Tribunal considers fit. The record showed that the Tribunal had already exercised that discretion and granted substantial relief by reducing the deposit requirement to 10% of the penalty. The challenge to the petitioners' prima facie case was not sufficient to dislodge the Tribunal's assessment, and the scope of interference under Article 227 remained narrow. At the same time, the Court found no infirmity in the Tribunal's exercise of discretion, but considered it appropriate in the interests of justice to further reduce the deposit requirement.

Conclusion: The Tribunal's order was sustained in principle, but the pre-deposit condition was modified from 10% to 5% of the penalty amount, with the balance to be secured by bank guarantee or surety to the satisfaction of the Appellate Tribunal.

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