TaxTMI 
TaxTMI 
2019 (9) TMI 940
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....ribunal proposes to decide both appeals filed by Shri Adnan Sami Khan and Ms. Sabah Galadari. The common order was passed by the Special Director of Enforcement, therefore, both appeals are being decided by single order. 4. In the impugned order, it is held that since the said 8 flats purchased by Shri Adnan Sami Khan including the flats transferred to Ms. Sabah Galadari are the properties involved in the aforesaid contravention which were purchased under utter disregard to the direction of the RBI, these 8 flats i.e. Flat Nos. A-1201-B, A-1201C, A- 1301A, A-1301B, A-1301C, A1401A, A1401B and A-1401C in the building Oberoi Sky Garden, the said flats are confiscated to Central Government in exercise of the powers conferred on me under section 13 (2) of the Foreign Exchange Management Act, 1999. Further the penalty of Rs. 20,00,000/- (Rupees Twenty lakhs only) imposed on Shri Adnan Sami Khan who should be deposited in the Office of Directorate of Enforcement at 23/24, Mittal Chambers, 2nd floor, Nariman Point. Mumbai-400021. Part of the penalty amount of Rs. Ten Lakh has been deposited by Adnan Sami Khan. The possessions of eight flats and parking space is with him. 5. While pa....
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....es were held by his wife Mrs. Sabah Adnan Sami Khan. . (e ) Statement of Sh. Adnan Sami was called for further enquiries and after repeated summons, he appeared on 20.01.2010 in response to summons dated 13.01.2010. In his statement dated 20.01.2010 recorded under Sec. 37 of FEMA, Shri Adnan Sami interalia stated that his full name is Adnan Sami Khan. He was born in Rawalpindi. He was a Pakistani national; and he had come to India on business visa eleven years before. (f) On being asked. Shri Adnan Sami stated that he had purchased Flat No. A1201-B and C, A-1301-A, B & C and A-1401- A, B & C, in Oberol Sky Garden Co-op. Hsg. Socy. Ltd. Lokhandwala Andheri (W), Mumbai on 29.12.2003; that out of the said flats 4 flats viz. A-1401, A,B and C and A-1201-C were purchased from R.S. Estate Developers Pvt. Ltd. (builder) and A- 1201 B, A-1301 B and A-1301 C were purchased from the builder and Mrs. Manisha S. Dhawan and A-1301-A from the builder and Mr. Rama Kapil Dhawan by way of tri-parte agreements. He had paid amounts totaling Rs. 2.53 Crores for purchase of these 8 flats. He further stated that for purchasing these flats, he had taken loan from Axis Bank (UTI....
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....11.02.2006, in order to separate his first account which he had used for daily expenses and the second account for disposing of house loan. When asked about mentioning his nationality as Indian on home loan application form, he stated that the Bank official had taken his signature prior to the filling of application form and that since he had applied for Indian Citizenship, he had declared himself as "Mr. Adnan Sami, adult, Indian Inhabitant (proposed)" on the Indemnity Bond, submitted to the Bank at the time of taking loan. (i). Enquiries were made with the Foreigners Registration office & Deputy Commissioner of Police, Mumbai. The Foreigners Registration Officer & Deputy Commissioner of Police, Special Branch (I), C.I.D. Mumbai vide their letter dated 06.02.2010 forwarded details of visa and other related details in respect of Shri Adnan Sami. It revealed that Shri Adnan Sami, a national of Pakistan holding Passport No. JO33468 issued on 29th July 2000 at Islamabad, was given "Visitor" visa No. P156000 valid from 03.08.2000 to 02.08.2001 with four entries on Passport No. JO33468, stay of 90 days of each visit with entry and exit point Mumbai and Delhi and permission to v....
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....he show cause notice in question came to be issued to Shri Adrian Sami Khan and Smt. Sabah Galadari. (m) Shri Vibhav Krishna, Advocate vide his letter dated 3/5/2010, 6/5/2010 and 14/5/2010 acknowledged the show cause notice and requested for time as the notice was out station. (n). Since no reply was filed by Shri Adnan Sami Khan, he was granted personal hearing on 21/06/2010, alongwith Smt. Sabah Galadari. The matter was adjourned to 08/07/2010 at the request of the Advocate for Shri. Adnan Khan. On 08/07/2010 Shri Vibhav Krishna, Advocate appeared alongwith Shri Adnan Sami Khan and requested for further adjournment and the matter was adjourned to 10/8/2010, However, on Shri Vibhav Krishna, Advocate vide his letters dated 6/8/2010 and 21/8/2010 demanded colour Xerox copy of the documents relied upon. In the interest of justice, colour Xerox copies of the documents were furnished to Shri Vibhav Krishna on 24/8/2010. (o) The matter was again posted for hearing on 16/9/2010. However, on 27/9/2010 Shri Adnan Sami appeared and informed that his Advocate is busy in High Court and requested for adjournment. He was asked to clear date in consultation w....
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....ning any permission from the Bank of India for the purchase of property in India by the Applicant. The applicant was not aware that being a Pakistan passport holder, he was required to obtain permission for purchase of property in India. The applicant was also not aware of any letter dated 14/10/2002 issued by the Reserve Bank of India to M/s. D.M. Harish & Co., Advocates refusing to grant permission. The Applicant was not aware of the engagement of M/s. D.M. Harish and Co. on his behalf, he was not consented and did not have any knowledge and did not grant any permission for the letter dated 2nd September, 2002 to be address to Reserve Bank of India. He was not even aware that any such letter had been addressed to Reserve Bank of India, seeking permission. Further, he was not aware and has till date not been furnished the said letter by M/s. D.M Harish & Co. viz., letter dated 14.10.2002 addressed by Reserve Bank of India to M/s. D.M. Harish & Co. refusing to grant permission. (iii) He submits that he has applied for Citizenship of India in the year 2002 with the Government of India and has given undertaking that in the event the citizenship was approved he shall surrende....
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....ndertaken with the permission of the Reserve Bank of India and there would be no contravention of any provision of law. The applicant submits that there was reasonable prospect of the permission being granted by the Reserve Bank of India to the application made by the applicant for grant of Expostfacto permission. The applicant submits that the show cause notice issued by authorities dated 12/4/2010 entails serious consequences if the Reserve Bank India's permission is not granted. (viii) The applicant therefore submits that in the interest of justice, till such time the application for the Expost-facto, sanction is considered by the Reserve Bank of India and attains a finality, the FEMA authorities may adjourn the matter by a period of 2 months in order to enable the applicant to pursue his application with the Reserve Bank of India. The Applicant submits that it is only after the response of the Reserve Bank of India is received, it attains the finality that the present show cause be proceeded with. The applicant submits that severe consequences shall be caused to the applicant if the permission is not granted and the present FEMA proceedings is proceeded wi....
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....he statements on 20.1.2010. 9. It was recorded that it was admitted by him that he has purchased 8 flats along with 5 parking spaces on 29.12.2003 in Oberoi Sky Garden for the consideration of Rs. 2,53,34,750/-, through loan from UTI Bank to the builder M/s. R.S Developers Pvt. Ltd. He had purchased these properties on 29/12/2003 and at that time when he was holding visitor visa to stay in India was limited to 90 days or 180 days at a time. 10. It was held in the impugned order that considering the totality of all these facts and circumstances it was held that the contention of the noticee (about ignorance of the letter of M/s. D.M. Harish & Co.) is false. Even going by his version that M/s. D. M. Harish & Co. did Inform him about the further developments it can be said safely that If M/s.. D. M. Harish & Co. had not informed him it was his duty to inquire from them especially when he had engaged them. It was opined in the impugned order that one of the reason to disown the letter of M/s. D. M. Harish & Co. is to legitimatize the so called ex post facto permission from the Reserve Bank of India. No doubt he has taken the stand of forgotten the statements recorded by the In....
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....oceedings under FEMA and allegation and contravention shall not stand. (b). The respondent has failed to appreciate that there was no circumstances for invoking provision of section 6 and Regulation 7 under FEMA since there was no involvement of foreign exchange and the flats were purchased on the basis of banking loan sanctioned by AXIS bank and the income of the Appellant on which he had paid taxes. (c ). The respondent has failed to appreciate that the application of the Appellant was adjourned so that the pending application for the grant of ex post facto sanction attains finality and ex post facto permission if granted, the allegation of contravention in the show cause notice No.T-4/08-B/SDE/RAJ /2010/FEMA/100 dated 12th April, 2010 would become infructuous. (d) The respondent has overlooked and ignored that the appellant is the bonafide purchaser of the flat and was not aware that an Advocate had made an application on his behalf on 2nd September, 2002 for permission to purchase flats in Mumbai and the permission was refused vide letter dated 14th October, 2002. (e ). The respondent failed to appreciate that the appellant is a bonafide purc....
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.... has reiterated that his mother is are from Jammu. (j) The Notice has erred and overlooked that the Noticee No. 1 is a reputed singer, musician and artist whose music has been widely appreciated in India since 1999 and news report of his a Pakistani nationality had been widely circulated and therefore it is common knowledge that he is a Pakistani national and therefore the statement of Mr. Arun Kotian, Mr. Vikas Oberoi on behalf of R.S. Estate Developers and the Bank Officials that they were unaware of his nationality is false, inaccurate and incorrect. (k) The Notice has disregarded that the Noticee NO.1 (Appellant) having matrimonial dispute with the Noticee No.2 and he has revoked the Deed of Gifts for 5 flats all dated 12th May 2008 on the basis that his marriage to Sabah Galadari was void ab initio since she had not complied with formality of "Halala" and the submission of the Appellant was upheld by the Family Court vide order dated 14th October, 2009 and which was challenged in Family Court Appeal No. 79 of 2009 in High Court Bombay which has by its order dated 23rd March 2010 set aside the order of Family Court and has remanded the matter to Family Court f....
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.... the Appellant had also inserted a Public Notice dated 8.5.2005 in compliance of formalities for issuance of Indian citizenship and a passport and had he along with lawyers had met the Senior officials in the Government of India in March 2005 wherein he was assured citizenship. (o) The Notice fails to appreciate that the purchase of the immovable properties is by registered documents in the year 2003 and the Appellant had disclosed his identity and PAN Card. There was no complaint and/ or enquiry against such purchase for next six years. Thereafter in May, 2008 the Appellant had gifted five flats to his then wife Sabah Galadari and has also executed mortgage deed for Flats on 13th May 2008. However, thereafter on account of matrimonial dispute and discovery of certain facts with shook the foundation of re-marriage to Sabah Galadari the Appellant had revoked the gift on 6th May 2009 and had also raised the plea of "Halala" in the Family Court, Bandra, Mumbai and which was upheld by Order dated 14th October, 2009. On that basis the gift became invalid. However, the said order has been set aside by High Court Bombay and the matter is to be prosecuted in Supreme Court of India....
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...., a Pakistani National on 5th April, 2007. The said factual position is not denied by the respondent. 15. It is alleged that her husband had gifted her the five flats, being Flat Nos. 1302/A, 1301/C, 1401/A, 1401/B and 1401/C along with the three parking spaces, situate at Oberoi Sky Garden Lokhandwala complex, Andheri(W), Mumbai- 400053 vide a registered Gift Deed dated 12th May, 2008 and the society transferred the flats to the Appellants name and the share certificates of the society are in her name, thus she is the sole legitimate owner of the five flats and three car parking spaces gifted to her. It is alleged that she had advanced a sum of Rs. 5.30 crores to her former husband from time to time between 8th April, 2007 and 23rd January, 2009, a substantial part of which was utilized for the furnishing with fittings of the said 5 flats. She was not aware that Mr Sami had executed the gift deed in her favour vis-à-vis the 5 flats without obtaining the requisite permission of Reserve Bank of India. In respect of remaining 3 flats (Flat no. A1201-B, A1201C and A1301B car parking space no.83 & 153), which also were purchased without RBI permission, therefore, had created ....
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....not purchase the flats from monies remitted from abroad but fraudulently obtained a loan from Axis bank of Rs. 1.5 Crores. Admittedly out of an aggregate consideration of Rs. 2,53,34,750/- (Two Crores Fifty Three Lacs Thirty Four Thousant and Seven Fifty) for the 8 flats an amount of Rs. 1.5 Crores was paid by virtue of the loan from Axis bank. The source of funds of the balance amount has not been revealed by Mr. Sami leading to an adverse inference that this amount too was not paid from funds remitted from abroad. Thus in addition to the violation of Regulation 7, there was a foreign exchange loss to this country as local funds & not foreign funds were used by a Pakistani citizen to acquire flats in India. (f) That even the loan of Rs. 1.5 Crores from Axis bank was secured by perpetrating a fraud. In the application form Mr. Sami disclosed his nationality as "Indian". (g) The fact that Mr Sami has subsequently been granted Indian citizenship is of no consequence whatsoever and certainly not an equitable consideration in his favour. It is doubtful if the authorities conferring citizenship on Mr Sami would have conferred that honour upon him had it been made aware....
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....s and advance sum of Rs. 5.40 crores are concerned, the same cannot decided before this Tribunal who does not wish to express any opinion in that regard. Even no final findings can be given. It is to be decided by the Competent Court as per law. 23. (Sec. 29 of FERA/6(3)(1) of FEMA). Section 6 has been incorporated with a specific intention including "prohibiting" acquisition of immovable properties In India. To achieve the said goal RBI had issued the Foreign Exchange Management (Acquisition and Transfer of Immovable property in India) Regulations 2000 (Notification No. FEMA/21/2000-RB dated 3rd May 2000), Regulation 7 of which reads as under: Regulation 7: Prohibition on acquisition or transfer of immovable property in India by citizens of certain countries - No person being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan without prior permission of the Reserve Bank shall acquire or transfer immovable property in India, other than lease, not exceeding five years. 24. The prior permission in order to purchase the property is an essential ingredient of the provisions of the relevant Regulation i.e. Regulation 7. 25. The word....
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....f FEMA reads as under- (2) Any Adjudicating Authority adjudging any contravention under sub-section (1), may, if he thinks fit, in addition to any penalty which he may impose for such contravention, direct that any currency, security or any other money or property in respect of which the contravention has taken place shall be confiscated to the Central Government..." It is evident from the above said provision that the same is not mandatory but discretionary. The penalty is to be imposed case to case basis as per facts and circumstances. 31. The finding of Adjudicating Authority is contrary to 3 decisions, one of the High Court of Punjab & Haryana & two of High Court of Madras. (a) In Piara Singh v Jagtar Singh AIR 1987 P&H 93, the Hon‟ble High Court while addressing the issue of contravention of section 31(1) and 63 of the Foreign Exchange Regulation Act, 1973, which also correspond with Regulation 7 of Foreign Exchange Management (Acquisition and Transfer of Immovable property in India) Regulations, 2000 and section 13(2) of the Foreign Exchange Management Act, 1999, held that: "Section 31(1) of the Foreign Exchange Regulation Act, 1973, pro....
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....2000 promulgated in exercise of powers conferred by clause (i) of sub-section (3) of section 6, sub-section (2) of section 47 of the Foreign Exchange Management Act, 1999 is not a void transfer in Civil Law. The FEMA Act, 1999 read with Regulation 7 of the FEM (Acquisition and transfer of immovable property in India Regulations, 2000 prohibits the acquisition and transfer of immovable property by a Pakistani citizen without RBI permission. Admittedly the authorities cited above establish title to the property thus passed to the purchaser on acquisition and to the transferee on transfer by virtue of registered documents. The payment was made against the loan in rupees. 33. Sec 13 (1) of the FEMA imposes a mandatory obligation on the Adjudicating Authority to impose a penalty or a contravention of any rule, regulation, notification, direction or order issued in exercise of powers under the FEMA. In particular, Sec.13(1) of the FEMA, 1999, uses the word "shall" for imposition of penalty, consequent upon contravention. This is in contrast with the provision under Sec.13(2) of the FEMA,1999, where confiscation of property involved in the contravention is dealt with. Sec. 13 (2) pr....
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....ted singer, musician and artist whose music has been widely appreciated in India since 1999 and news reports of his Pakistani nationality had been widely circulated. Reason no. 3 RIGHT TO CROSS -EXAMINE MATERIAL WITNESS' WAS DENIED (a) It is admitted position that the Appellant had preferred an application for cross-examination of certain witnesses whose statements had been recorded and relied upon by the Respondent for issuance of the Show Cause Notice viz. 1) Mr. Vikas Oberoi, 2) Mr. Arun Kumar Kotian, 3) Valli Sekar (Assistant Vice President of Axis Bank) and 4) Manju Shrivastav (President -Retail Banking - Axis Bank). The Appellant had also requested for permission to examine himself and other witness in support of his defense. (b) On 19.10.2010 when the aforesaid application came up for hearing; no orders were passed on the application and the matter was listed for arguments on 18.11.2010. The application for permission to cross examine the witnesses whose statement have been relied upon by the FEMA authorities in support of show cause notice and the permission to examine the appellant himself has remained pending and has been not been adjudicated till date. (c ....
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....e the subject-matter of the cross-examination and make the remarks as mentioned above." (ii ) This Hon‟ble Tribunal in Shri Jaswinder Singh v. The Special Director, Directorate of Enforcement, Delhi being No. FPA-FE-217/DLI/2008 vide its judgment dated 10.07.2018 while observing the right to cross examination is an integral part of principles of natural justice has observed as under: "35... The statements should be corroborated from the independent facts and statements are not reliable till their veracity and genuineness is not tested by cross examination. 36. Therefore, under the established principles of natural justice, the appellant requested before the Adjudication Authority for permission to cross examine the witnesses so as to enable them to establish his innocence and to state and/or explain his case." (iii) In view of the aforesaid submissions and the law as laid down by the Hon‟ble Supreme Court in Andaman Timber Industries (Supra), the adjudicating authority by not passing any order on the Appellant‟s application for cross-examination has prejudiced the Appellant‟s case against the principles of natural justice and settled ....
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....hile observing the power of the Reserve Bank of India to grant an ex post factor permission in terms of the ratio as laid down by the Hon‟ble Supreme Court in Life Insurance Corporation of India v. Escorts (1986) 1 SCC 264 has observed that when an application is pending before the Reserve Bank of India, the adjudicating authority should not/cannot/couldn‟t have passed the Impugned Order imposing penalty on the Appellant as well as confiscation of the properties in question as well. Reason no. 6 THE APPELLANT IS AN INDIAN CITIZEN It is the admitted position that during the pendency of the present appeal, the Appellant has been granted the Citizenship of India on 01.01.2016. A certificate of Naturalisation bearing No. 5659 dated 01.01.2016 has been issued by the Ministry of Home Affairs under the provision of the Citizenship Act, 1955. Reason no. 7 It is admitted position that FEMA was enacted to deal with violations pertaining to foreign exchange laws. A bare perusal of the statement of objects and reasons of FEMA would indicate that the intent of the legislature was to consolidate and amend the law relating to foreign exchange with the objective of facil....
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....rissa 1969 (2) SCC 627 in relation to a venial or technical breach of the provision of the Act or where the breach flows from a bona-fide belief has held as under: "8. Under the Act penalty may be imposed for failure to register as a dealer - Section 9(1) read with Section 25(1)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasicriminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breac....
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....e flats were purchased by Shri Adnan Khan illegally; the subsequent transfer was also illegal" and other such findings in the said paragraph 39 of the Impugned Order are liable to quashed and set aside. 41. This Tribunal in M/s. True Axiz Resorts Pvt Ltd v. The Special Director, Directorate of Enforcement, Mumbai being Appeal No. FPAFE- 140/MUM/2010 (reliance is placed on paragraphs No. 2, 3 & 6) vide order dated 14.06.2018 while adjudicating a contravention inter alia pertaining acquisition of shares in terms of Foreign Exchange Management (Transfer or issue of Security by a person resident outside India) Regulations 2000 and acquisition of agricultural land under the automatic route of foreign direct investment observed that when confiscation ex-facie is harsh, the order of the adjudicating authority has to be set-aside insofar as confiscation of properties is concerned. 42. This Tribunal in Shri Dr. D. Rewatha Thera v. The Joint Director, Directorate of Enforcement, Lucknow being Appeal No. FPA-FE- 54/LKW/2014 (reliance is placed on paragraphs No. 20, 22 &23) vide order dated 23.01.2019; while deciding an order passed under Section 13 of FEMA for violation of provision of ....