FEMA compliance breaches upheld, but penalties reduced where delayed reporting and share allotment were established on the facts.

Delayed reporting of foreign direct investment remittances, delayed allotment of shares beyond 180 days, and non-filing of FC-GPR were held to constitute established FEMA contraventions against the company and its directors. The Tribunal relied on the timing of the remittances, the belated share allotment, and recorded statements linking the directors to the compliance-related affairs. It further held that a later RBI circular on delayed filing could not be applied to earlier transactions and that the civil nature of FEMA violations meant absence of mens rea did not bar penalty. On the facts, however, the penalties were reduced as proportionate relief.

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Issues: (i) whether the contraventions relating to delayed reporting of foreign remittances, delayed allotment of shares and non-filing of FC-GPR under FEMA were established, and (ii) whether the penalties imposed on the company and its directors required reduction.

Issue (i): whether the contraventions relating to delayed reporting of foreign remittances, delayed allotment of shares and non-filing of FC-GPR under FEMA were established.

Analysis: The remittances of foreign direct investment were received in 14 tranches over several years, the first four tranches were not reported within the prescribed time, the shares were allotted much beyond the stipulated period of 180 days, and FC-GPR was not filed in respect of the allotment. The Tribunal also relied on the statements recorded under FEMA to hold that the individual directors were associated with the company affairs relevant to the foreign investment compliance.

Conclusion: The contraventions were established against the company and the directors.

Issue (ii): whether the penalties imposed on the company and its directors required reduction.

Analysis: The Tribunal held that the subsequent RBI circular governing delayed filing could not be applied to transactions that predated it. It also accepted that FEMA contraventions are civil in nature and that the absence of mens rea did not by itself bar penalty, but considered the facts and circumstances to make the penalties proportionate.

Conclusion: The penalties were reduced in favour of the appellants.

Final Conclusion: The appeals succeeded only to the extent of reduction of penalties, while the findings of contravention under FEMA were maintained.

Ratio Decidendi: In FEMA contraventions concerning delayed reporting and share allotment, penalty may be sustained even without mens rea, but the quantum can be moderated on the facts where the breach is established and the later circular is inapplicable to earlier transactions.

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