TaxTMI 
TaxTMI 
TaxTMI 
2014 (7) TMI 1291
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....n the Reserve Bank. Finally, the petitioner has called into question a summons which has been issued by the Assistant Director in the Directorate of Enforcement on 22 May 2014 and an order of the Reserve Bank dated 9 April 2014 requiring the petitioner to approach the Reserve Bank for prior approval for any ODI transactions in respect of its wholly owned subsidiary in Singapore. In 2007, the petitioner incorporated a wholly owned subsidiary in Singapore. The subject-matter of the contraventions which took place, consists of two remittances. The first remittance of USD 15,000/- took place on 14 August 2007 which was reported to the Reserve Bank on 9 March 2012. The second remittance of USD 5,00,000/- took place on 16 August 2007 which was reported to the Reserve Bank after a delay of over four and a half years on 9 March 2012. The petitioner also issued on 30 December 2011 a corporate guarantee of USD 10 million (equivalent to Rs. 53.01 crore), which was reported to the Reserve Bank on 28 September 2013. The wholly owned subsidiary of the petitioner was allotted a Unique Identification Number, UIN on 8 February 2013. When the first and the second remittances were made, admittedly th....
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....ed an ODI form for reporting an investment of USD 10 million in the form of a corporate guarantee in favour of the Standard Chartered Bank of Singapore which was stated to be filed on 9 March 2012 through the authorised dealer. The petitioner, accordingly, re-submitted an application for compounding the contravention of the 2004 Regulations once again claiming that the delay in reporting the transaction was not willful or mala fide but had occurred out of ignorance and on account of the non availability of a competent person. 6. On 3 May 2013, the Reserve Bank in a further communication to the petitioner stated that the petitioner had not yet reported all the remittances on-line through its authorised dealer and had not completed other administrative compliances in the absence of which the application for compounding could not be considered. On 25 June 2013, the petitioner re-submitted its compounding application with all necessary documents. The plea for compounding was sought to be justified on the following grounds: "We may submit that the delay in reporting transaction to Reserve Bank of India is not willful, unintentional, without having mala fide and fraudulent intentions ....
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....on for review was rejected on the ground that the Foreign Exchange (Compounding Proceedings) Rules, 2000, Compounding Roles,, do not confers right of review. The petitioner was also; placed on notice that under Rule 10, in the event a person fails to pay the sum compounded within the time specified in Rule 9, he shall be deemed to have never made an application for compounding of any contravention under the rules. The petitioner was also placed on notice that in case the contravention is not compounded, the other provisions of the FEMA would apply. 11. The first submission which has been urged on behalf of the petitioner is that under Section 13 of the FEMA, a penalty for the contravention of the provisions of the Act is provided upto three times the sum involved in the contravention where the amount is quantifiable or upto Rs. 2 lac where the amount is not quantifiable. In the present case, it was submitted that the amount involved in the contravention is not quantifiable and, hence, only a penalty up to Rs. 2 lac could have been imposed. 12. There is no merit in the submission. Section 13(1) of the FEMA provides as follows: 13. Penalties.--(1) If any person contravenes any pr....
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....Any contravention under Section 13 may, on an application made by the person committing such contravention, be compounded within one hundred and eighty days from the date of receipt of application by -he Director of Enforcement or such other officers of the Directorate of Enforcement and officers of the Reserve Bank as may be authorised in this behalf by the Central Government in such manner as may be prescribed. (2) Where a contravention has been compounded under sub-section (1), no proceeding or further proceeding, as the case may be, shall be initiated or continued, as the case may be, against the person committing such contravention under that section, in respect of the contravention so nor pounded." 16. Section 15 provides for an application by a person committing a contravention under the provisions of Section 13. Any such contravention under Section 13 can be compounded, on an application made by the person committing the contravention, by the competent officer of the Directorate of Enforcement or of the Reserve Bank, as authorised by the Central Government. The Compounding Rules regulate the procedure to be followed in regard to the compounding of contraventions. R....
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.... before the Court indicates that when the petitioner moved the initial application for compounding, it did not disclose the issuance of a corporate guarantee, in the compounding application. Consequently, it was on 27 September 2012 that the Reserve Bank informed the petitioner that the authorised dealer, Punjab National Bank had reported a corporate guarantee of USD 10 million issued by the petitioner to Standard Chartered Bank. Since there was no reference to the corporate guarantee in the compounding application, the application was returned for fresh submission. It was thereafter that the petitioner re-submitted a compounding application for dealing with the contraventions both in relation to the remittances and the corporate guarantee. In the compounding application, the petitioner pleaded ignorance and the unavailability of a competent person to advise it in Varanasi. During the course of the personal hearing, both at the hearing of the compounding application and the review application, the petitioner was represented by its Chartered Accountant and admitted the contraventions but pleaded leniency. Though the amount involved in the contravention was Rs. 55.12 crore, a total p....
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....te of the order. The failure to do so results in the consequence as provided in Rule 10, that the applicant shall be deemed to have never made an application for compounding of any contravention under the Rules, and the provisions of the Act for contravention shall apply to him. The order of compounding was passed on 23 December 2013. The petitioner failed to deposit the amount directed in the compounding order within fifteen days. The petitioner moved a review application which was also dismissed on 24 January 2014. Even thereafter, the amount was not deposited as required. The petition was filed before this Court on 1 March 2014. The petition has been pending on the file of this Court since then until the date of the passing of this order. The communication of the Reserve Bank dated 9 April 2014 is in terms of the provisions of Rule 10 which provides the consequence of a failure to comply with the order of compounding within 15 days. The Enforcement Directorate only issued a summons on 22 May 2014. No exception can be taken by the Court to either of these communications. 21. Since the petitioner has, through its learned Senior Counsel, indicated an unconditional readiness and wi....