TaxTMI 
TaxTMI 
2019 (5) TMI 1466
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....MP-FE-212/MUM/2018(Misc.), MP-FE-213/MUM/2018(Stay), MP-FE-214/MUM/2018(Exem.), MP-FE-215/MUM/2018(Exem.), MP-FE-216/MUM/2018(Misc.), MP-FE-217/MUM/2018(Stay), MP-FE-218/MUM/2018(Exem.), MP-FE-257/MUM/2018(Stay), MP-FE-193/MUM/2018(Stay), MP-FE-194/MUM/2018(Stay), MP-FE-195/MUM/2018(Exem.), MP-FE-258/MUM/2018(Stay), FPA-FE-61/MUM/2018, FPA-FE-48-57/MUM/2018 For the Appellant no. 1: Mr. Pradeep Sancheti, Sr. Advocate, Mr. Vikas Kumar Jha, Advocate, Ms. Nikitha Shenoy, Advocate For the Appellant no. 2: Mr. Mahesh Jethmalani, Senior Advocate, Mr. Amol Chitale, Advocate, Ms. Pragya Bagital, Advocate For the Appellant no. 3: Mr. Amit Sibal, Senior Advocate, Mr. Sohan, Advocate, Mr. Manik, Advocate, Mr. Ambav, Advocate For the Appellant nos. 4 to 9: Mr. Abhishek Singh, Advocate, Mr. Shreshth Arya, Advocate For the Appellant nos. 10 & 11: Mr. Ashok K. Gupta, Sr. Advocate, Mr. L.S. Shetty, Advocate, Mr. Abhishek Gupta, Advocate, Mr. Harshil Gupta, Advocate, Ms. Mamta Bhattacharya, Advocate For the Respondent: Mr. Rajeev Awasthi, Advocate JUDGEMENT 1. By this order, I propose to decide interim applications filed by the appellants for dispensation to deposit the penal....
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....Srinivasan (iv) the total penalty of Rs. 9,72,00,000/- (Rupees Nine Crores and Seventy Two Lakhs only) imposed on Shri M.P. Pandove (v) the penalty of Rs. 7,00,00,000/- (Rupees Seven Crores only) imposed on State Bank of Travancore (now merged with State Bank of India) Jaipur Branch and (vi) the penalty of Rs. 10,00,000/- (Rupees Ten Lakhs only) imposed on Shri A.K. Nazeer Khan, the then Chief Manger, State Bank of Travancore, Jaipur should be deposited at the office of the Joint Director, Directorate of Enforcement, Kaisar-I-Hind Building, 4th Floor, Currimbhay Road, Ballard Estate, Mumbai-400 001, by means of a Demand Draft/Pay order drawn in favour of "DDO A/c Directorate of Enforcement, Mumbai' within 45 days from the date of receipt of this Order. While depositing the penalty, the Adjudication order No. And date as mentioned in the first page of this order should be quoted clearly." 2. The admitted facts are that the inaugural session of IPL was held in April - May, 2008. Letter dated 13.03.2009, addressed by Ministry of Home Affairs ("MHA") to BCCI, informing them that due to the coinciding general elections, State Governments would be unable to provide security for the se....
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.... bearing No. T-4/16-B/SDE/R/2011 (SCN-I) to (SCN-XI) issued by the Special Director ("Show Cause Notices") to BCCI and its Officers for FEMA violations. 4. The preliminary reply filed by BCCI to the Show Cause Notices ("Reply") was filed on 28.02.2012. 5. By letter dated 13.04.2015, ED informed BCCI that the Special Director, ED is of the opinion that adjudication proceedings be held against BCCI. Call Notice for personal hearings was sent to BCCI who received. 6. When the hearing was held on 29.04.2015. BCCI's filed an application under Rule 4(3) & 4(5) of Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 seeking reasons accompanying the opinion dated 13th April, 2015. Arguments were advanced on the same at the hearing. Advocates for BCCI filed a note on arguments/written submission pursuant to liberty granted by the ED at the personal hearing on 29th July, 2015. The Adjudicating Authority passed an Order dated 19.11.2015 on the Application dated 29th July, 2015. In the order, the Adjudicating Authority given the reasons for the Opinion and reconfirmed the Opinion. 7. In the meanwhile, Judgment passed by Hon'ble Bombay High Court in Writ ....
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....ed office bearers/ officials of BCCI were also charged in terms of section 42(1) & (2) of FEMA 1999 b) The amount of US$ 4,98,62,799.42 mentioned in this SCN represents the total remittances made by BCCI to CSA to meet the expenses incurred /proposed to be incurred, by them on behalf of BCCI, for the conduct of IPL Tournament in South Africa. These remittances were made against an agreement titled 'heads of Agreement' dated 30.3.2009 executed between BCCI and CSA. These remittances were made by BCCI from their bank account maintained with State Bank of Travancore (Since merged with SBI), Jaipur Branch, covered under 8 separate remittances , out of which, amounts totalling US$ 3,55,00,000 were made under 6 remittances during the period 31.3.2009 to 23.5.2009 and the remaining two remittances of US$ 40,00,000 & US$ 1,03,62,799.42 were made on 10.8.2009 and 27.8.2010 respectively. The requisite instructions for the transfer of funds for first two remittances were given by BCCI to their bank on 28.3.2009, which was prior to the signing of the agreement with CSA. Similarly, the last two remittances were made after the conclusion of the tournament, out of which, the last remitta....
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....n", requiring specific permission from RBI. But no such permission was taken by BCCI from RBI for making these payments to CSA. Thus, the charge against BCCI was proved and established and accordingly, penalty was, imposed on BCCI, in terms of section 13(1) of FEMA 2999. (The detailed findings made, in holding the BCCI guilty of the charge, resulting in the imposition of penalty, is given under Para 17.1 to 17.16 of the Adj. Order) f) Out of the remaining noticees in this SCN, charges were found established against (i) Shri Lalit Kumar Modi, the then Chairman of IPL (ii) Shri N. Srinivasan, the then Hon' Secretary of BCCI and (iii) Shri M.P. Pandove, the then Hon. Treasurer of BCCI. The role played by Shri M.P. Pandove At the relevant time, Shri M.P. Pandove was working as the Hon. Treasurer of BCCI.) The declaration under Form A-2, corresponding to the transfer of funds to CSA, were all signed by Shri M.P Pandove, in his capacity as the Treasurer of BCCI. While submitting the A-2 Forms, no documentary proof was furnished by Shri M.P. Pandove to the bank to confirm the specific purposes, for which, these remittances were sought to be made to CSA. ....
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....th the help of CSA, to bypass the requirement of opening an account in their own name, for which, specific permission was required from RBI. d) The BCCI had contested the existence of the A/c in the name of IPL (SA) Pty Ltd by submitting that citing some discrepancies inn the title of this A/c by stating that there was no bank A/c in the name of IPL (SA) Pty Ltd. In the complaint filed u/s 16(3) of FEMA 1999, it was stated that an amount of ZAR 2,90,550,000 was credited into the bank A/c No 420948619 maintained with Standard Bank of South Africa. The transcript of this A/c had also confirmed the credits of these amount in the said A/c by way of transfer from the bank A/c of CSA. Also, the credits in this A/c were funded, out of the remittances made by BCCI to CSA, for meeting the expenses IPL -2 in South Africa. e) There was no dispute regarding the existence A/c No 420948619 maintained with Standard Bank of South Africa. It is thus apparent that, the said account was managed and controlled through a proxy entity, by BCCI. The funds credited in the said account had also emanated from the coffers of BCCI. Having confirmed the beneficial ownership of this account by....
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.... M.P. Pandove The role played by Shri M.P. Pandove The findings made under SCN-V in respect of the role of Shri M.P. Pandove also holds good in this SCN as well. v) VII. SCN. No. T-4/16-B/SDE/R/2011 (SCN-VII) a) In this SCN, the BCCI was charged u/s 6(3)(d) of FEMA 199 r.w Reg3&5 of FEM (Borrowing or Lending in Foreign Exchange) Reg. 2000, for borrowing foreign exchange amounting to US$ 60,00,143 (Equiv. Rs. 30,00,07,150) from CSA. The concerned office bearers/officials of BCCI were charged in terms of section 42(1) & (2) of FEMA 1999. b) The aforesaid amount, represented the excess amount transferred by CSA from their A/c to the dedicated bank A/c no. 420948619. It was the contention of BCCI that these transfers had taken place between CSA and its associate entity, and therefore, the charge does not sustain. As per the findings given under SCN-V, the dedicated A/c was nothing other than an account controlled and operated by BCCI through Proxy. The transcript of the dedicated bank account revealed that the amount of US$ 60,00,143 credited in this account was not backed up by transfer from the A/c of CSA, thereby, suggesting that this cre....
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....t liabilities". The remittance of US$ 1,03,62,799.42 is a well established and confirmed fact. Thus, the remittance of excess payment of Equiv. Rs. 44,15,99,200/- remained unaccounted and unexplained by BCCI, leading to the confirmation of the charge against them in the SCN resulting into the imposition of penalty, in terms of section 13(1) of FEMA 1999. (The detailed findings made, in holding the BCCI guilty of the charge resulting in the imposition of penalty is given under Para 40.1 to 40.4 of the Adj. order) c) Out of the remaining noticees in this SCN, charges were found established against (i) Shri Lalit Kumar Modi (ii) Shri N.Srinivasan and (iii) Shri M.P.Pandove. The role played by Shri M.P. Pandove The findings made under SCN-I in respect of the role of Shri M.P. Pandove also holds good in this SCN as well, as the amount of US$1,03,62,799.42 remitted, which form the basis for the charge in this SCN, also formed part of the amount involved in SCN-I .The fund transfer of this amount was processed by Shri M.P Pandove, in his capacity as the treasurer of BCCI and the A-2 Form, corresponding the said remittance was also signed by Shri M.P.Pandove. ....
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....2(1) & (2) of FEMA 1999. The concerned office bearers/ officials of BCCI were charged in terms of section 42(1) & (2) of FEMA 1999. b) BCCI had contested the charge by submitting that the revenue from the 'pouring rights' were not due or accrued to them and therefore, section 8 of FEMA 1999 had no applicability. It was also submitted by them that these amounts were not mentioned in the agreement, as being part of the amount entitled to be received by them from CSA .They also contended that these amounts were claimed by the concerned stadia owners, as being their rights, and there was dispute arose with the stadia owners on this count. Shri N. Srinivasan in his statement had admitted that two types of revenues were available to BCCI directly viz. revenue from the sale of tickets and revenue from the" pouring rights". In the debit note raised by CSA under the title "Income earned till 15.8.2009" the amount of ZAR 9,31,567 was shown against 'pouring rights' earned by CSA for BCCI. Thus, the right to receive the pouring rights was well recorded by CSA and BCCI in their respective records. The reported dispute with the stadia owners on the ownership of the pouring rights, were ....
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.... BCCI, resullting in the imposition of penalty on them, in terms of section 13(1) of FEMA 1999. c) Out of the remaining noticees in this SCN, charges were found established against (i) Shri Lalit Kumar Modi (ii) Shri N.Srinivasan and (iii) Shri M.P.Pandove. The role played by Shri M.P. Pandove The remittance of US$ US$ 1,03,62,799.42 was done as per the transfer request made by Shri M.P. Pandove. The relevant A-2 Form for this transfer was signed by him. The amount involved in the SCN is linked to this remittance of US$ US$ 1,03,62,799.42. Thus, the charge against Shri Pandove was proved and established, resulting in the imposition of penalty on him, in terms of section 13(1) of FEMA 1999. x) XII. SCN. No. T-4/16-B/SDE/R/2011 (SCN-XII) a) In this SCN, State Bank of Travancore, Jaipur was charged u/s 10 (4) of FEMA 1999 r.w AD ( MA Series) Circular No. 11 dated 16.5.2000 and also section 10(5) of FEMA 1999 to the extent of (i) US$ 4,98,62,799.42( Equiv Rs. 243,45,20,781) (ii) US$ 1,03,62,799.42( Equiv. Rs. 46,63,25,973/-) & (iii) US$ 89,34,040 (Equivalent to Rs. 41,72,19,671/-), for engaging in transaction involving these amounts, on beha....
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.... iv) The Adjudicating Authority also rejected the Appellant's request for giving time for producing documents. 14. Thereafter, BCCI received the Impugned Order dated 31st May, 2018 passed by the Adjudicating Authority levying a total penalty of INR 82,66,54,000/- on BCCI. The BCCI has now challenged the impugned order inter-alia as under:- (i) The Order is patently as it does not deal with the basic aspect about the transactions in question as it relate to the IPL-2 and are only pertaining to current account transactions only. (ii) Out of 11 SCNs, in 3, the discharged order was passed. The penalties have been levied in the remaining. (iii) The Order records the BCCI position that there is no subsidiary by the name IPL (SA) (Pty) Ltd. which is a principle charge alleged in most of the SCNs and yet the Order proceeds on the same very basis. (iv) The Order records the Appellant's position that the account by the name CSA Pty Ltd - IPL SA was opened and operated by CSA (through its designated officials), however, the Order proceeds on a contrary basis. (v) The Order gives a finding that the transactions in question were capital account tr....
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....ed Order erroneously holds that the Applicant purportedly incurred a 'contingent liability', since no budget was prepared. The Applicant submits that the occurrence of IPL-2 was not uncertain. It was merely the quantum of expenditure that was to be incurred that was uncertain. Further, the Impugned Order provides no particulars of the alleged contingent liability incurred by the Applicant. In fact, the Impugned Order does not even specify the alleged contingency i.e. the specific trigger event. Thus, a mere uncertainty of quantum of expenditure does not render a transaction a contingent liability and/or thereby a Capital Account Transaction. d) The Adjudicating Authority has erred in holding that the CSA Hosting Agreement was not a genuine trade or service agreement creating mutual rights and obligations between the Applicant and the CSA. The Applicant submits that the Adjudicating Authority has failed to appreciate that FEMA does not prohibit cost plus fee arrangements, such as the CSA Hosting Agreement, which create mutual rights and obligations between parties. In this regard, the Applicant submits that a cost plus fee arrangement does not violate the provisions of FEMA....
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....ugned in the Complaint would attract the provisions of Section 6(3)(d) of FEMA as they amount to 'borrowing' and/or 'lending ' transactions. The Applicant submits that despite borrowing and lending being a legal concept that necessarily requires a loan agreement to be in place, which would specify the interest payable, term period, instalments etc. for the loan, neither the Complaint nor the Impugned Order contains particulars of the purported loan agreement impugned in Show Cause Notice Nos. VII and VIII. Further, the impugned transactions are in fact mere transfer of funds from one account of CSA to another account of CSA and thus cannot be called a loan. Thus, there is complete non-application of mind inasmuch as to meet the expenses for IPL-2, if the funds are remitted by the Applicant from India they are treated as lending transactions and if the funds are brought in by CSA to the given CSA Pty Ltd - IPL SA account, they are treated as a borrowing. The Adjudicating Authority has also erred in holding that the amount of INR 4,40,01,581/- shown in the books of the Applicant was the final amount that was due and payable to CSA under the CSA Hosting Agreement. The Applica....
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....alty is illegal as the Adjudicating Authority has erred in proceeding to levy penalty on the Applicant on the basis that the IPL-2 event was a device to remit funds abroad. 19. BCCI submits that this allegation/finding, apart from being unsustainable, is vague and ought to be rejected on the ground that there is no allegation, much less a finding of any amount being siphoned away or misappropriated by any party/individual in the Complaint/Show Cause Notices. Further, the Adjudicating Authority has not denied that the IPL-2 was in fact successfully held in South Africa. 20. Appeal No. 56 of 2018 by Shri N. Srinivasan seeking waiver of pre-deposit The appellant has been held vicariously liable for alleged violations of the provisions of FEMA by the BCCI, by invoking the provisions of section 42(1) of the FEMA and has been saddled with a total penalty of Rs. 11,53,00,000/- over and above the penalty of Rs. 82,66,54,000/- imposed on the BCCI. It is stated that the provisions of section 42(1) of the FEMA cannot be invoked in case of BCCI. Section 42 deals with contravention by companies. "Company" has been defined in the explanation to the said section, to mean any "body cor....
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....d not at any stage even consider the Applicant's letter dated 4th May, 2018, for withdrawal of the Call Notice insofar as it called for a 'last and final' hearing, thereby violating Rule 4(9) of the Adjudication Rules, as well as basic principles of natural justice and fair play. 21.3 On merit, it is stated that only financial dealings attributed to the appellant are the remittances made by BCCI, which were facilitated by him. However, the allegations in Show Cause Notices V to VII and IX to XI do not even relate to remittances made by BCCI. Further, A-2 Forms were thoroughly scrutinized by the Authorized Dealer to his complete satisfaction and no further documents were requisitioned from BCCI with respect to Show Cause Notices I & VIII. Thus, failure of the Adjudicating Authority to explain to him the charges against him caused the grave prejudice as he did not have the requisite information/ explanation to prepare and defend himself adequately in the proceedings. 21.4 The Impugned Order has been passed in violation of Rule 4(9) of the Adjudication Rules as the Adjudicating Authority summarily rejected the Applicant's application dated 7th May, 2018 (wherein the ....
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.... Applicant, has claimed that the Applicant ought to submit his asset/ liability statement to justify his request for dispensation with deposit of penalty. It is submitted that if deposit of the penalty amount, on the Respondent's own case, requires liquidation of the assets of the Applicant, who is 73 years of age, this alone is sufficient to demonstrate the economic hardship that the Applicant will suffer if pre-deposit of penalty is not waived. 22. Appeal No. 50 to 55 of 2018 - case pf Shri Lalit Kumar Modi seeking waiver of pre-deposit 22.1 The appellant was the Vice President of BCCI and Chairman of IPL. The office bearers of BCCI are defined in the BCCI Rules and Regulations to mean the president, Honorary Secretary, Honorary Joint Secretary and Honorary Treasurer. Therefore, neither the Vice President of BCCI nor the Chairman of IPL is an office bearer of BCCI. 22.2 In view of the above explanation, though, BCCI can be considered as a person for the purposes of FEMA, however, the office bearers of BCCI cannot be proceeded against under section 42 of FEMA because BCCI is neither a body corporate nor a firm nor an association of individuals. A perusal of th....
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....is dedicated account was Account Number: - 420948619. This account was an account of CSA Pty Ltd that is Cricket South Africa Pty Ltd and not of IPL SA Pty Ltd and no such entity by the name of IPL SA Pty Ltd has been created. Even the truth has come from the cross examination of the investigating officer of the case from questions and answers number 48 to 80. 22.6 The cross examination of the investigating officer from questions and answer number 82 shows that the respondent had obtained an opinion/clarification from the RBI regarding the alleged infractions and suppressed the same, it appears from the record of cross-examination of the investigating officer in questions and answers number 102 to 111 that according to RBI there was no infraction of FEMA as is being alleged by respondent. During the course of adjudication proceedings the appellant had made an application for cross examination of the concerned RBI official i.e. Mr Ajay Kumar, however, such request was rejected without assigning any reason. 22.7 The witnesses examined during cross-examination had interalia admitted that: firstly, Appellant was not an office bearer of BCCI and was not responsible for....
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....ening of Bank account. Mr Shashank Manohar in his cross examination admits that he had decided the venue of South Africa for IPL - 2. It is clear from the email dated 24/03/2009 issued by Mr Srinivasan the method of account operation in South Africa was decided by Mr N Srinivasan and Shashank Manohar. 23. FEMA Appeal no. 48 and 49 of 2018 by State Bank of India and A.K. Nazeer Khan. By the common Impugned Order dated 31.05.2018 passed by the Respondent above named imposing penalties in the sums of Rs. 7 Crores on the Appellant Bank for the alleged contravention of the provisions of sub-sections (4) and (5) of Section 10 of the Foreign Exchange Management Act,1999 (hereinafter referred to as the "FEMA") read with the relevant Regulations and Rs. 10 lakhs on the Appellant in Appeal No. 49 of 2018, viz : Shri A.K. Nazeer Khan for the alleged contravention of Section 42(1) of FEMA. The Appellant in Appeal No. 49 of 2018 - Shri A.K. Nazeer Khan, during the years 2008-09 was working as the Chief Manager in the erstwhile State Bank of Travancore at its Ashok Marg Branch, Jaipur and he continued in the said post at the said place upto 26.05.2011. The State Bank of Travancore, (....
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....d upon to tender any explanation for such alleged misuse of foreign exchange either by the BCCI or its members after its licit remittance from India, on complying with all the requisite conditions. 23.2 Subsequently, vide detailed Replies, the Appellants submitted that it is not legally permissible to allege that the Appellants committed contraventions of the legal provisions and the Appellants could not be held legally accountable. Therefore, thus, the impugned imposition of penalties is, therefore, illegal, unlawful and not justifiable in law, without proper exercise and/or improper exercise of powers and jurisdiction and/or in utter non application of mind. It is stated that in a case where remittance/s made in a lawful manner after complying with the relevant provisions of law and also all the general and/or special directions and/or orders issued by the Reserve Bank of India and also within the four corners of the authorization given to the authorized person like the present case, the issue which arises for consideration and adjudication in the instant case by the Tribunal whether after such lawful and legal remittance having being made whether it is legally ....
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....lleged as to which particular part of that circular has been contravened by the appellant and in what manner. Therefore, the Show Cause Notice itself was wholly vague and ought not to have been issued. Here below reproduced are the provisions of said sub-sections (3), (4) and (5) of Section 10 FEMA :- "10(3) After considering the cause, if any, shown by such person, the Adjudicating Authority if of the opinion that an inquiry should be held, he shall issue a notice fixing a date for the appearance of that person either personally or through his legal practitioner or a chartered accountant duly authorised by him." "10(4). An authorized person shall, in all his dealings in foreign exchange or foreign security, comply with such general or special directions or orders as the Reserve Bank may, from time to time, think fit to give, and, except with the previous permission of the Reserve Bank, an authorized person shall not engage in any transaction involving any foreign exchange or foreign security which is not in conformity with the terms of his authorization under this section." "10(5). An authorized person shall, before undertaking any transaction in foreign....
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....reement, A-2 Forms and Declarations from BCCI confirming the bona fides of the transactions, etc. It is the case of the Appellant that at the time when the BCCI approached the SBT along with all the requisite documents, requesting transfer of foreign exchange to CSA, the foreign exchange was transferred against the transaction by SBT. 23.7 Timely R - Returns were being regularly filed by the Appellant - Bank to the Reserve Bank of India in respect of each of all the remittances of Foreign Exchange legally effected by the Appellant - Bank. In not even a single instance, the RBI raised any objection or pointed out any irregularity committed by the Bank. The R - Returns being the Control Register/Document, through which the RBI exercises its supervision over all the Authorized Persons in Foreign Exchange in the matters of all Foreign Exchange Remittances effected out of India, the RBI would have definitely pointed out and hauled up the Appellant - Bank had there been any small or trivial irregularity in the Transaction, not to speak of any FEMA Violation. A true copy of such R - Return format is filed herewith as Annexure-2. The returns were filed fortnightly as mand....
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.... take into consideration the pros and cons of both the confession and retraction made by the accused. It is one thing to say that a retracted confession is used as a corroborative piece of evidence to record a finding of guilt but it is another thing to say that such a finding is arrived at only on the basis of such confession although retracted at a later stage. ................ ................ 40. In Mohtesham Mohd. Ismail v. Enforcement Directorate this Court held : (SCC pp. 262-63, paras 19-20) "19. Apart therefrom the High court was bound to take into consideration the factum of retraction of the confession by the appellant. It is now a well-settled principle of law that a confession of a co-accused person cannot be treated as substantive evidence and can be pressed into service only when the court is inclined to accept other evidence and feels the necessity of seeking for an assurance in support of the conclusion deducible therefrom. (See Haricharan Kurmi v. State of Bihar, Haroom Haji Abdulla v. State of Maharahstra and Praksh Kumar v. State of Gujarat.) 20. We may, however, notice that recently in Francis Stanly v. Narcotic Cont....
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....urt has held as follows :- "14. no materials can be relied upon to establish a contested fact which are not spoken to by persons who are competent to speak about them and are subjected to cross-examination by the party against whom they are sought to be used." In the present case, the Adjudicating Authority failed to give an opportunity to the Appellant to cross-examine several witnesses whose statements have been relied upon by the Adjudicating Authority. Hence, the said statements cannot be relied upon by the Adjudicating Authority. 25. Appeal No. 49 of 2018 As for the Appeal No. 49 of 2018 filed by Shri A. K. Nazeer Khan, it is submitted that Impugned Order is ex-facie illegal qua the penalty of Rs. 10,00,000/- imposed without any legally sustainable ground or cogent reason. He has been made a scapegoat by the Impugned Order. He was not the person responsible for the conduct of the business of the entire SBT. It was clarified by him in his statement which is being relied upon by the Respondent, as the Chief Manager of the Branch, he had to take the advise and guidance from the Foreign Exchange Department of his Bank, functioning from his Head Office, then situa....
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.... election in India. The venue of IPL- 2 Edition as South Africa was shortlisted by Shri Lalit Kumar Modi, due to better infrastructural facilities and stadiums available in South Africa. In the working Committee meeting of BCCI, Shri Lalit Modi had requested the members to approve, opening of an account abroad with a remittance of US$ 10 million to take care of the expenses for staging of the IPL abroad. The negotiation with Cricket South Africa was held under the leadership of Shri L.K.Modi. The terms and conditions of the agreement by BCCI with CSA was discussed and finalized by Shri Lalit Modi and other officials of BCCI with the officials of CSA. All the relevant vouchers and bills for any payments to be made to the vendors in South Africa in connection with the conduct of IPL-2 required the final authorization and approval from Shri Lalit Modi. The process of approval of the bills and vouchers raised by the foreign vendors by Shri Lalit Modi were explained by Shri Sunder Raman COO of IPL, Shri Prasanna Kannan, the then Manager of IPL and Shri M.P. Pandove, the then Hon. Treasurer of IPL in their respective statements given before the Deptt. (Refer Para 19.6/ 19.7 & 19....
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....tty - The Then Chief Executive Officer of BCCI: Role Played: Shri Ratnakar Shetty was the Chief Executive Officer of BCCI at the relevant point of time. The charges against him were dropped in the Adjudication order. f). Shri Prasanna Kannan - The Then Manager (Business and Commercial services) IPL: Role Played: Shri Prasanna Kannan was the Manager (Business and Commercial services) IPL at the relevant point of time. The charges against him were dropped in the Adjudication order. g) Shri Sunder Raman - The Then COO of IPL: Role Played: Shri Sunder Raman was the COO of IPL at the relevant point of time. The charges against him were dropped in the Adjudication order. h) & i). State Bank of Travancore, Jaipur Branch and Shri A.K.Nazeer Khan, the then Chief Manager: He has argued that if the allegations made in the show cause notices and role played by each individual are examined, the appellants have not been able to make out any case of interim relief sought and they be asked to deposit the penalty amount. 28. Mr. Awasthi submitted that it is a matter of record that the cross-examination of t....
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....ow:- (i) Opinion under Rule 4(3) of the FEM (Adjudication proceedings and Appeal) Rules 2000, was formed on the basis of cause shown by the respective noticees through their replies filed and copies of such opinion formed were supplied to these noticees on request during the course of the adjudication proceedings. (ii) Copies of all the documents relied upon in the Show Cause Notices were supplied to the noticees. (iii) The personal hearings were initially held separately with each of the noticees. However, in compliance to the Order passed by the Hon'ble High Court, Joint personal hearings were held subsequently. (iv) The requests for cross-examination of the Complainant made by the Advocates of Shri Lalit Modi and State Bank of Travancore were allowed and conducted. (v) The cross-examination of nine co-noticees / witnesses were allowed and conducted in pursuance to direction given by Hon'ble High Court of Bombay. (vi) The Advocates of the co-noticees / witnesses were allowed to remain present during the cross-examination of their clients by the Advocate of Shri Lalit Modi and copies of record of cross-examination were also sup....
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....e Bombay High Court in the case of Shashank Vyankatesh Manohar v. Union of India and The Directorate of Enforcement and held as follows :- "19. It has been specifically provided in Rule 4 of the Adjudication Rules that the noticee under the Act is entitled to raise an objection to the issuance of the notice and the adjudicating Authority is obliged to consider those objections and form an opinion whether or not to proceed further with the Show Cause Notice. Formation of opinion itself would presuppose an application of mind to the facts and the objections of the party before it is decided to proceed further with the Show Cause Notice. This opinion cannot be arbitrary, but must be supported by reasons, however, minimal those reasons may be to evidence application of mind to the objections raised by the noticee" .................. 21. Thus, in view of the above discussion, it is submitted that the Adjudicating Authority after issuing Show Cause Notice and receiving objections thereto, is required to apply his mind to the objections if any, raised by the Noticee, by recording his reasons for forming an opinion on the file. It is further submitted that the or....
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....he hearing the Adjudicating Authority had informed the Appellant that he will not consider any request for adjournment, which indicates that the Applicant had a closed mind. In fact, Rule 4(5) necessarily requires the Adjudicating Authority to consider adjourning the matter to a future date. 36. It is stated by Mr. Awasthi that the said contention was carefully examined by the adjudicating Authority, while forming an opinion dated 13.4.2015 under Rule 4(3) of the FEM (Adjudication Proceedings and Appeal) Rule 2000, to proceed with the Adjudications proceedings. Copies of the opinion formed were also provided to all the noticees, who had sought for recall and review of the opinion formed by stating that the opinion formed did not deal with many of the objections raised by them trough their written submissions. Consequently, a detailed reply under letter dated 9.11.2015& 19.11.2015 addressing all to the objections raised were sent by the then adjudicating Authority to all the noticees, informing that that their request for recall of the opinion could not be entertained. The letter so issued contained explanations on all the points raised by the noticees including the issue regardi....
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.... clearly observed that the matter be decided as per the rules. 40. Rule 4(4), (5) and 4(9) are read as under:- "Holding of inquiry, - (4) On the date fixed, the Adjudicating Authority shall explain to the person proceeded against or his legal petitioner or the chartered accountant, as the case may be, the contravention, alleged to have been committed by such person indicating the provisions of the Act or of rules, regulations, notifications, direction or orders or any condition subject to which an authorisation is issued by the Reserve Bank of India in respect of which contravention is alleged to have taken place. (5) The Adjudicating Authority shall, then, given an opportunity to such person to produce such documents or evidence as he may consider relevant to the inquiry and if necessary, the hearing may be adjourned to future date and in taking such evidence the Adjudicating Authority shall not be bound to observe the provisions of the Indian Evidence Act, 1872 (1 of 1872). (9) Every order made under sub-rule (8) of the rule 4 shall specify the provisions of the Act or of the rules, regulations, notifications, direction or orders or any cond....
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.... that the proceedings of Rule-4 cannot be ignored even there may be direction from court to decide the matter in time bound manner. Even in the present case, the Hon'ble Bombay High Court has indicated about the compliance of rules. 45. Mr. Rajeev Awasthi, learned counsel for the respondent submitted that in the SCNs issued, Shri Shashank Manohar, the then President of BCCI, Shri Lalit Kumar Modi, the then Chairman of IPL, Shri N.Srinivasan, the then Secretary of BCCI & Shri M.P. Pandove, the then Treasurer of BCCI, were all charged along with BCCI, u/s Section 42(1) of FEMA 1999. Similarly, Prof. Ratnakar Shetty, the then CAO of BCCI, Shri Prasanna Kannan, the then Manager, Business and Commercial Services of IPL and Shri Sunder Raman, the then COO of IPL, were all charged along with BCCI u/s section 42(2) of FEMA 1999. 46. It is submitted by Mr. Awasthi that Shri N. Srinivasan, the then Secretary of BCCI in a separate Writ Petition No. 2815 of 2016 filed before the Hon'ble Madras High Court had also challenged the vicarious liability clause u/s 42(1) invoked against him in the SCNs issued. The said Writ Petition was decided by the Hon'ble Court vide Order dated 09.07.2018. ....
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....il meetings. The negotiations with CSA Authorities were held by a team of BCCI officials headed by Shri Lalit Modi, which eventually led to the execution of the heads of agreement dated 30.3.2009. 51. It appears to this Tribunal from the material placed on record that BCCI is a society registered under 'The Tamil Nadu Societies Registration Act'. [The said Act in Section 15 (1) provides for a committee for management of the affairs of the society registered under the Act the said provision provides as under: - Tamil Nadu Societies Registration Act 1975 Section 15.(1) Committee.- (1) Every registered society shall have a committee of not less than three members to manage its affairs. Every registered society shall file with the Registrar a copy of the register maintained by it under sub-section (1) of section 14 and, from time to time, file with the Registrar notice of any change among the members of the committee. (2) The Government may, in their discretion, remit, in whole or in part, any fee payable under this Act.] 52. In accordance with the said provision the BCCI has a working committee which is defined in Rule 12 of the BCCI rules and regulati....
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....ment" of being a person in charge of the business of the company." 53. The BCCI in its rules and regulations more specifically rule 34 of its memorandum of rules and regulations provides for indemnity, the said provision reads as under :- 34.INDEMNITY Every member or an Associate Member of the Board, every other official/office-bearer or a member of a Committee for the time being of the Board and every Trustee thereof shall be indemnified out of the Board's funds against all losses and expenses incurred in the discharge of his duties , except those which have occurred through his own willful act or default and if so, each one shall be chargeable only for so much monies or properties as he shall himself actually receive for or in the discharge of the business of the Board and each one shall be answerable only for his own act, neglects or default and not for those of any other person. 54. It is argued on behalf of all the appellants that in view of an indemnity in the rules and regulations of BCCI, the respondent cannot fasten vicarious liability, therefore, the pre-deposit amount is not to be deposited by them. 55. a) In the case of Bhagwati Prasad Khaitan....
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....e other directors, like him can possibly be held liable even vicariously for the offences alleged against them." c) In the case of Shashank Vyankatesh Manohar v. Union of India and The Directorate of Enforcement, the Hon'ble Bombay High Court held as under: "...34. Since the provisions of Section 42 of the Act are in pari materia with the provisions of Section 141 of the Negotiable Instruments Act, 1881, the principles laid down by the Supreme Court in S.M.S. Pharmaceuticals Ltd. V. Neeta Bhalla and another, (2005) 8 SCC 89, are required to be applied to FEMA cases also. The Supreme Court has in terms held that the liability is cast on persons who may have something to do with the transaction complained of and not on the basis of merely holding a designation or office. It would depend on what role one plays and not on designation and status. Since the nature of liability and consequences cast by Sections 13 and 14 of the Act, as indicated in paragraph 16 of this judgment, are no less penal than the liability and consequences under Section 138 of the Negotiable Instruments Act, the only persons who can be to be connected with the contravention of FEMA at the relevant....
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....erely lay down the policy and are not concerned with the day to day working of the Company. Consequently, the mere fact that the accused person is a partner or director of the Company, shall not make him criminally liable for the offences committed by the Company unless the other ingredients are established which make him criminally liable". f. Rashima Verma v. SEBI (2009) 95 SCL- 1 (Delhi) It was held by the Hon'ble Delhi High Court that mere allegations contained in a line or two against directors in a Complaint, without specifying violative act committed by any of Directors, would not be suffice to make Directors offenders so that summon them for offences. The ratio decided in the said case makes it clear that mere averment in the complaint that the Respondents, as Directors of the company and its present Managing Person were in-charge of the affairs of the company and thus they were responsible for the conduct of the day to day business, would not be sufficient enough to hold such Directors and Managing Person guilty of contraventions. g. Abdul Moid & Ors. vs. The State (1977 CRI L. J. 1325) Hon'ble Allahabad High Court - Lucknow Bench was pleased to observe....
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....the Act. 58. It is not denied on behalf of respondent that during the course of the adjudication proceedings, the above noticees, through their written submissions filed, as replies to the SCNs, as well as the oral submissions made during the course of personal hearings, the said appellants had challenged the applicability of the vicarious liability clauses u/s 42(1) & (2) of FEMA 1999 invoked against them in the SCNs, by submitting that these clauses would be rendered applicable only when, the principal contravener in the SCNs viz. the BCCI, could treated as a 'company', but, in the instant case, BCCI was neither a Body Corporate nor a firm nor an association of individuals, but only an Association of Associations, registered as a society under the Tamil Nadu Societies Registration Act and therefore, BCCI could not be qualified to be treated as' company' as per the explanation for a company provided under section 42 of FEMA 1999. 59. BCCI is not a company as admitted by all parties, but only an Association registered as a Society. Prima facie, there is force in the submission of learned counsel appearing on behalf of appellant nos. 2 to 11 and it appears that at this stage, ....
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....erefore the transactions were not "Current Account Transactions" prima facie but "Capital Account Transactions". Thus, the finding of the Adjudicating Authority prima facie cannot be accepted at this stage as holding of the IPL - 2 was a certain event, as per the agreement dated 30/03/2009 the arrangement between BCCI and CSA was cost plus fees arrangement. 64. It is submitted that illegal funds were transferred between BCCI and CSA. It is alleged that in the Working Committee Meeting of BCCI held on 22.03.2009, Shri Lalit Modi requested the members to approve the opening of an Account of US$ 10 Million to take care of the expenses proposed to be incurred for staging of IPL abroad. Shri Shashank Manohar, the then President of BCCI while responding to this request from Shri Lalit Modi, had proposed that BCCI would open an account after seeking necessary clearance from RBI. All the members in the working Committee had agreed to the aforesaid request made by Shri Lalit Modi. Thus, the BCCI and its officials/office bearers were fully seized with the legal requirement of obtaining the permission from RBI before opening a bank account abroad, to defray the expenses proposed to be incu....
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....SA) Pty Ltd in South Africa. It is stated that the same was figured in the complaint as well as in some of the SCNs. Under Para 4.10 of the complaint, it was stated that "A current Account bearing No. 420948619 was opened in the name of IPL (SA) (PTY) Ltd with the Standard Bank of South Africa Rose Bank Branch, Sandton, PO Box 62325, Marshall Town 2107 (South Africa). Authorised signatory of the said accounts were Mr. Don, Mr. Trish and Mr. Christelle, all from South Africa." This account was the dedicated bank account opened by CSA in South Africa to transfer and credit the funds received by them from BCCI, to defray various expenses expected to be incurred for the conduct of IPL- 2 in South Africa. There was no dispute regarding the existence of this account bearing No. 420948619 opened with Standard Bank of South Africa. There is also no dispute regarding the transfer of funds made by CSA to this account, which were funded out of remittances received by them directly from BCCI. Similarly, there was no dispute raised by the Noticees regarding the funds credited in this account, originated from various source of revenues related to the conduct of IPL2 in South Africa. The funds cr....
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....x Act the Phrase contingent liability has been explained by the Hon'ble Apex court in judgment reported as (2000) 6 SCC 645 in the following manner :- "4. The law is settled: if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. The liability is in present though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain." 69. NO PENALTY FOR VENIAL BREACH OF LAW The Supreme Court has reiterated the said principle in the case of Hindustan Steel Ltd. vs. State of Orissa reported in 1969 (2) SCC 627 and held as follows:- "8. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed....
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....nds replaced by FEMA) to consider the question of propriety of imposing penalty in the facts of a given case. It observed that it is settled law that penalty would not be imposed in quasi criminal proceedings merely because it is lawful to do so. Whether penalty should be imposed or not is a matter of discretion to be exercised judicially and on a consideration of all the relevant circumstances. The Calcutta High Court also placed reliance on the decision in Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC), which had been relied upon by this Court in Sunil Engineering Corporation (supra). The Calcutta High Court held as follows: "18. We are also of the view that in any event both the authorities under the said Act erred in not specifically considering the question of propriety of imposing penalty in the facts of the case. Decisions are legion in support of the proposition that penalty will not be imposed in quasi-criminal proceedings merely because it is lawful to do so. Whether penalty should be imposed or not is a matter of discretion to be exercised judicially and on a consideration of all the relevant circumstances. In this connection reference may be made....
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....t that, if there are relevant differences, due allowance should be made for them. In the case of cooffenders, different sentences may reflect different degrees of culpability or their different circumstances. If so, the notion of equal justice is not violated.... Discrepancy or disparity is not simply a question of the imposition of different sentences for the same offence. Rather, it is a question of due proportion between those sentences, that being a matter to be determined having regard to the different circumstances of the co-offenders in question and their different degrees of criminality." The Court, therefore, concluded the principle to mean: "... the concept simply is that, when two or more cooffenders are to be sentenced, any significant disparity in their sentences should be capable of a rational explanation." 73. In nutshell, it is evident from the record that there is no subsidiary in the name of IPL SA Pty Ltd, which is the principal charge, as alleged in the Show Cause Notices. The BCCI or any official have not deposited any amount whatsoever in relation to the IPL-2 organized, despite of admission in cross-examination of the witnesses. However, ....
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....r was allowed to inspect the original complaint. Even the signed copy of cross-examination and other correspondence exchanged were not provided to him. He is senior citizen and also a pensioner of the Government of Punjab. He is a former first class cricketer and a retired Punjab Government Officer. He has also served as the Chairman of the Punjab Public Service Commission. He was the honorary Treasurer of the BCCI at the relevant point of time who did not receive any remuneration for performing the functions. There is no allegation against him for appropriation of any amount in the entire event of IPL-2 held in South Africa. One is failed to understand how the penalty of Rs. 9,72,00,000 is imposed upon him and how he would be able to pay the said penalty. No valid justification is mentioned whatsoever given in the impugned order. Even the appellant no. 3 has been able to establish his financial hardship vii) In the light of above, prima facie, it appears that the penalty imposed on other appellants is also very excessive and without application of mind. 74. It is true that the respondent has made many allegations of malpractices. But the cases are not decided on the ba....