TaxTMI 
TaxTMI 
2014 (12) TMI 1355
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....;), Enforcement Directorate ('ED') in twelve Show Cause Notices ('SCN') i.e. SCNs VI to XVII, all dated 25th October 1989 and levying various penalties on the Appellant Continental Construction Ltd. ('CCL'), [the Appellant in Crl. A. No. 773 of 2008] and its individual directors [the Appellants in Crl. A. No. 774 to 781 of 2008]. The background to the present appeals is that during the period 1975-1990, CCL was engaged in various construction projects in Iraq and Libya. Prior permission of the Reserve Bank of India ('RBI') was obtained and seven Directors of CCL were stationed in both these countries as non-resident Indians. According to CCL, during the progress of the projects, it became necessary to open fo....
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....val for the inter-project transfer of funds and also for the transfer of funds from the current account to the call deposit account. By the second letter dated 11th April 1989, RBI granted post facto approval regularizing the allotment of 35,90,000 shares of Rs. 10 each as on 31st December 1986 to the non-residents of Indian nationality/origin on non-repatriation basis. The conditions for the approval granted were also spelt out in the said letter. The said permission was to be treated as permission accorded under Section 29(1)(b) of the Foreign Exchange Regulation Act, 1973 ('FERA') for the purchase of shares; under Section 19(1)(a) FERA for the export of the shares issued to the country of the residence of the non-resident investo....
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....ccording to SD the approval dated 11th April 1989 of the RBI did not throw light on the permission given to CCL to give loans to non resident Indians, and, therefore, this was in violation of Section 9(1)(a) FERA. A penalty of Rs. 1 lakh each was imposed on CCL and its directors. 8. SCN No. X dealt with the payment of the dividends into the ordinary non-residents account with a bank authorised to deal in foreign exchange in India. The SD held that there was contravention of condition (d) in the approval letter dated 11th April 1989. Therefore, CCL and its directors were found to be in contravention of Section 9(1)(a) FERA. A penalty of Rs. 3 lakh each was imposed on CCL and its directors. 9. The subject matter of SCN Nos. XI to XVII was t....
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....o or any other permission. The wisdom of the RBI in granting post facto approval is not to be interfered with. 13. The effect of granting post facto approval is as if the infraction did not occur in the first place and it stands regularized with respect to the date of such infraction. If the orders passed by the RBI dated 9th February 1989 and 11th April 1989 are carefully examined, the post facto approvals virtually cover every aspect of the twelve show cause notices that were issued subsequently to CCL and its directors. In fact the whole idea of a post facto approval was that the failure to obtain prior permission as emphasised in various provisions of the FERA was condoned and therefore regularized. Therefore, this Court fails to under....
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....ific permission had also been given under Section 29(1)(b) FERA to the NRI shareholders for purchasing the shares clearly the entire act of granting loans was itself regularized. Therefore, this Court is unable to sustain the finding of the SD as regards SCN No. IX and the consequent penalties imposed. 17. The crux of the SCN No. IX concerns para (d) of the letter dated 11th April 1989. The condition for grant of the approval was that the dividends accruals had to be deposited to the investor's ordinary non-resident account and since that was not shown to have been the case, there was violation of Section 9(1)(a) FERA. A careful perusal of SCN No. IX would show that no such allegation has been made and that the notice having not been p....