TaxTMI 
TaxTMI 
2020 (1) TMI 544
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....ational Ltd. New Jersey (incorporated on 04.02.2000 ), Dashmesh International Ltd. California (incorporated on 19.05.2000) & Dashmesh International Music S.A., South Africa (incorporated on 15.12.1999), through its Wholly Owned Subsidiary (WOS) Dashmesh International Ltd., Mauritius (DILM) without the permission of the RBI. 3. The appellant company acquired the shares of DILM on 13.03.2001. The DILM had acquired the entire equity in the two American Step-down subsidiaries on 22.08.2001 & the South Africans step-down subsidiary on 01.08.2001. The investment made by DILM in the step down subsidiaries during the period of May, 2001 to February, 2002. 4. In the list of dates & events filed by the appellant company, it is stated that the appellant company filed an application in form ODA (for investments in DILM to the RBI on 07.06.2001 and RBI granted clearance by letter dated 22.11.2001. Thus, even when there application was pending with the RBI, the appellant company through its WOS (DILM) made further investment totaling US $ 7,54,100 in the three step-down subsidiaries. 5. Following are the main contention of the appellant:- (i) That DILM was engaged in Interna....
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....rring losses, the Company applied to the Reserve Bank of India for permission to close down the WOS. (ix) On 20.07.2005, by its letter, the Reserve Bank of India accorded its approval to the Company's application for closure of the WOS and advised the Company to surrender the holding licence, if issued, and to produce evidence of repatriation of a sum of AED 2,24,095.22 towards realizable equity investment. 6. On the other hand, the Legal Consultant appearing for the Respondent contended the following:- (i) That the appellant contends that the technical lapses were noticed only when the Company approached the RBI for conversion of loan to equity, however it is pertinent to note that the appellant herein has hidden vital facts from the RBI. It is seen that while obtaining initial permission from RBI, the appellant was exchanging correspondence with RBI on 20.08.2001, 14.09.2001 and 30.10.2001 but still the Appellants refrained from divulging the information of the acquisition. The appellant only after a delay of two years informed RBI on 20.09.2003 whereas they were aware vide permission granted to them on 22.11.2001, that prior approval needs to be sought for t....
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.... Order) (ii) Without prejudice, the quantum of penalty imposed under the Impugned Order is bereft of any rationale resulting in arbitrary exercising of discretion by the Respondent • Innovative Tech Pacl Ltd. vs. Special Director of Enforcement, 2017 (356) E.L.T. 193 (Del.) • Bata India Ltd. vs. The Special Director, Enforcement of Directorate, New Delhi, 1996 SCC OnLine Cal 93. (iii) Without prejudice, the quantum of penalty imposed on the Appellant Company ought to be proportionate to the alleged contravention • Chairman, SEBI vs. Shriram Mutual Funds, (2006) 5 SCC 361 • Jaipur IPL Cricket (P.) Ltd. vs. Special Director, Enforcement Directorate, Mumbai MANU/AE/0001/2017 (iv) No penalty ought to be levied on Mr. Kumar S. Taurani (Chairman and Managing Director) of the Appellant Company. • Umesh K. Modi vs. Deputy Directorate of Enforcement 2014 (3) JCC 2028 • SMS Pharmaceuticals Ltd. (I) vs. Neeta Bhalla (2005) 8 SCC 89 • Saroj Kumar Poddar vs. State (NCT of Delhi) (2007) 3 SCC 693 • In Kavita Dogra vs. Director of Enforcement (2014) 182 Com Cas 376 an....
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....the conditions specified in sub-regulation (2), (and Regulation 7 in case investment in financial services sector) an Indian party may make direct investment in a Joint Venture or Wholly Owned Subsidiary outside India. (2) (i) The total financial commitment of the Indian party in Joint Ventures/Wholly Owned Subsidiaries shall not exceed 100% of the net worth of the Indian Party as on the date of the last audited balance sheet; Explanation: - For the purpose of determining the 'total financial commitment' within the limit of 100% or as decided by the Reserve Bank from time to time, of the net worth the following shall be reckoned, namely: (a) Remittance by market purchases namely in freely convertible currencies; in case of Bhutan, investment made in freely convertible currencies or equivalent Indian Rupees, in case of Nepal investments made only in Indian Rupees; (b) Capitalisation of export proceeds and other dues and entitlements as mentioned in Regulation 11; (c) Hundred per cent. of the value of guarantees issued by the Indian party to or on behalf of the joint venture company or wholly owned subsidiary; (d) Investment in ag....
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....inancial Action Task Force (FATF) as within "non co-operative countries and territories" as per list available on FATF website www.fatf-gafi.org or as notified by the Reserve Bank of India from time to time.] (3). Investment under this regulation may be funded out of one or more of the following sources, namely- (i). out of balance held in the Exchange Earners' Foreign Currency account of the Indian party maintained with an authorised dealer in accordance with Regulation 4 of Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2000; (ii). drawal of foreign exchange from an authorised dealer in India shall not exceed 100%, or as decided by the Reserve Bank from time to time, of the net worth of the Indian Party as on the date of last audited balance sheet; Explanation: - For the purpose of the limit of 100%, or as decided by the Reserve Bank from time to time, of the net worth, the following shall be reckoned, namely-: (a) cash remittance by market purchase; (b) capitalisation of export proceeds and other dues and entitlements as mentioned in Regulation 11 and 12; (c) [h....
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.... to time. (4) (i) An Indian Party may extend a loan or a guarantee to or on behalf of the Joint Venture/Wholly Owned Subsidiary abroad, within the permissible financial commitment, provided that the Indian Party has made investment by way of contribution to the equity capital of the Joint Venture. Notwithstanding the above regulation, the following shall also be permitted. (ii) An Indian Party may extend corporate guarantee on behalf of its first generation step down operating company within the prevailing limit for overseas direct investment. Explanation.- Issue of corporate guarantee on behalf of second level or subsequent level step down operating subsidiaries will be considered under the Approval Route, provided the Indian Party indirectly holds 51 per cent, or more stake in the overseas subsidiary for which such guarantee is intended to be issued. (iii) The Indirect resident individual promoters of the Indian Party may issue personal guarantee on behalf of the overseas JV/WOS of the Indian Party provided the provisions under regulations 6 are fulfilled by the Indian Party and further provided that- (a) total 'financial commitment' i....
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.... outside India registered with the appropriate regulatory authority in the host country. Regulation13. Post investment changes /additional investment in existing JV/WOS (1) A JV/WOS set up by the Indian party as per the Regulations may diversify its activities / set up step down subsidiary/ alter the shareholding pattern in the overseas entity: Provided the Indian party reports to the Reserve Bank, the details of such decisions taken by the JV/WOS within 30 days of the approval of those decisions by the competent authority concerned of such JV/WOS in terms of local laws of the host country, and, include the same in the Annual Performance Report required to be forwarded annually to the Reserve Bank in terms of Regulation 15. 11. The pleadings of the appellants are that the RBI has given postfacto approval to the aforesaid investments made in further step-down subsidiaries, for that the quantum of penalties imposed are disproportionate, for that the appellant Mr. Kumar S. Taurani (Chairman & Managing Director) of the appellant company should not have been penalised. 12. During the course of the argument the learned counsel for the appellant has drawn ....
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....ow that he was responsible for the activities of the appellant company. Besides, neither the appellant company nor Mr. Kumar S. Taurani could be able to show any other document to prove that somebody else is the person responsible for the day-to-day affairs of the company not Mr. Kumar S. Taurani. The following judgments • Umesh K. Modi vs. Deputy Directorate of Enforcement 2014 (3) JCC 2028 • SMS Pharmaceuticals Ltd. (I) vs. Neeta Bhalla (2005) 8 SCC 89 • Saroj Kumar Poddar vs. State (NCT of Delhi) (2007) 3 SCC 693 • In Kavita Dogra vs. Director of Enforcement (2014) 182 Com Cas 376 and National Small Industries Corporation Ltd. vs. Harmeet Singh Paintal (2010 3 SCC 330) cited by the appellants are not applicable in the given fact and circumstances of the case. There are clinching evidence that Mr. Taurani was responsible for day-to-day affairs of the company. Therefore, it is held that the Adjudicating Authority has rightly made Mr. Taurani responsible for the said contraventions and imposition of penalty. 15. It is further contended by the learned counsel for the appellant company that the quantum of penalty imposed are n....