TaxTMI 
TaxTMI 
2022 (7) TMI 983
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....ign remittance of Rs.203.82 crore, i.e., US$43.5 million through Centurion Bank towards acquisition of 100% equity stake of Monte Cello B.V., Netherlands from its holding company Monte Cello Corporation NV, Netherlands under "Automatic Route" of Reserve Bank of India as prescribed in the Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2000 ("the said Regulations"). On 22.11.2000, petitioner No.1 informed the Reserve Bank of India about the said transaction. Vide letter dated 28.02.2001, an "Unique Identification Number" was allotted to the said transaction by the Reserve Bank of India. The acquired company holds 100% shares in two copper mines in Australia which have thus become wholly owned subsidiaries of petitioner No.1. 2. On 11.06.2008, respondent No.1, i.e., the Special Director of Enforcement, Ministry of Finance, Government of India issued a consolidated show-cause-notice to petitioner Nos.1 to 5 alleging that petitioners, by remitting US$43.50 million for acquisition of two copper mines in Australia in the year 2000, had contravened the provisions of section 6(3)(a) read with section 42(1) and 42(2) of the Foreign Exchange Management A....
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....r Nos.2 to 5, however, they were directed to deposit an amount of Rs.1,00,000/each as compounding charges and contravention was compounded. Petitioners deposited the compounding charges as directed with the appropriate authority on the very next day by Demand Drafts. 4. By letter dated 21.11.2008 addressed to the Chief General Manger, Reserve Bank of India, i.e., the Compounding Authority, petitioners intimated that they had deposited the compounding charges in compliance of the five compounding orders. 5. Petitioners have pleaded that it was the duty of the Compounding Authority to inform the Adjudicating Authority, i.e., respondent No.1 who had issued the show-cause-notice dated 11.06.2008 so that any further proceedings may not be continued in terms of section 15(2) of the said Act read with Rule 6 and 7 of the Foreign Exchange (Compounding Proceedings) Rules, 2000 ("the Rules"). Petitioners have asserted that "compounding order" means an order issued under sub-section (1) of section 15 of the said Act. 6. On 21.11.2008, respondent No.1 passed the adjudication order-in-original determining show-cause-notice dated 11.06.2008 holding that petitioners have contravened the provis....
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....aid Rules in case the amount involved is more than Rs.50 lakhs, the Chief General Manager of the Reserve Bank of India is the designated statutory Compounding Authority, who has passed the compounding orders under section 15(1) of the said Act and further under Rule 7 it was the statutory duty of the Compounding Authority to inform the Adjudicating Authority who had issued the show-cause-notice of the fact of compounding; that petitioner No.1 had already informed the Compounding Authority on 21.11.2008 of the said fact and the deposit of the compounded amounts on the next day, i.e., 21.11.2008; hence it was incumbent upon the Compounding Authority to intimate the Adjudicating Authority issuing the show-cause-notice so as to avoid continuation of any further proceedings in terms of section 15(2) of the said Act and on receiving such information the Adjudicating Authority was required to discharge petitioners; (iv) that in terms of the statutory provisions petitioners stand discharged and no proceedings in relation to the pending show-cause notice can survive after the compounding orders have been passed by the Compounding Authority and petitioners having complied with the same by ....
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....incorporated in Rule 10 of the said Rules which provide that in case a person fails to pay the sum for which the offence is compounded in accordance with Rule 9 within the time specified in that Rule, he shall be deemed to have never made an application for compounding of any contravention under the said Rules and the said Act for contravention; that petitioners, having paid the compounded amount on 21.11.2008 and proof of such payment having already been submitted before the Compounding Authority as well as respondent No.1, deserve complete immunity; (vii) that there lies no jurisdiction and/or authority in law for respondent No.1 to pass the impugned order dated 21.11.2008 in respect of proceedings arising out of show-cause-notice dated 11.06.2008 once the Compounding Authority has lawfully compounded the contravention alleged in the show-cause-notice by passing the compounding orders under section 15 (1) of the said Act read with Rule 8 (2) of the said Rules on 20.11.2008 and petitioners having complied with the same by depositing the compounded amounts by demand drafts on 21.11.2008 and informing the Compounding Authority about the same on 21.11.2008 itself; (viii) that pro....
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.... 21.11.2008 was passed by respondent No.1; (iv) that there is an express admission of petitioners before the Compounding Authority of having committed the contravention as alleged in the show-cause-notice of the provisions of the said Act and the said Regulations during the compounding proceedings; (v) that the compounding orders were passed by the Compounding Authority without hearing the respondents and as such were not sustainable; (vi) that the impugned order dated 21.11.2008 was sustainable in law and enforceable against petitioners; (vii) that there was a clear violation of the provisions of Rule 8(2) of the said Rules by petitioners before the Compounding Authority and it was incumbent upon petitioners to have impleaded the answering respondents as proper and necessary party to the compounding proceedings; (viii) hence, Mr. Patil prays for dismissal of the present petition. 9. We have heard both the learned advocates and perused the pleadings and exhibits. Submissions made by the advocates have received due consideration. 10. It will be appropriate to advert to the relevant statutory provisions and their applicability to the facts of the present case. 11. Chapte....
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....e facts of the present case it is seen that the compounding order is passed on 20.11.2008 and the adjudication order levying penalty is passed on 21.11.2008, i.e., one day after the passing of the compounding order. Sub-section (2) of section 15 as alluded to hereinabove clearly envisages a position that once a contravention has been compounded under sub-section (1) (which in the present case has been compounded on 20.11.2008), no proceeding or further proceeding, as the case may be, shall be initiated or continued, as the case may be, against the person committing the contravention. 11.5. In the present case, on perusing of the adjudication order dated 21.11.2008 passed by the respondent No.1, it is seen that the proceedings had arisen out of show-cause-notice dated 11.06.2008, personal hearing was given on 29.9.2008 and petitioners had filed their further written submissions on 31.10.2008. This means that the proceeding/further proceedings, as the case may be, as stated in subsection (2) of section 15 were already initiated before passing of the compounding order on 20.11.2008; hence in terms of sub-section (2) of section 15, it is clear that no proceeding or further proceeding,....
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....Bank of India shall exercise the powers to compound any contravention subject to the direction, control and supervision of the Governor of the Reserve Bank of India. (5) Every application for compounding any contravention under this rule shall be made in Form to the Reserve Bank of India, Exchange Control Department, Central Office, Mumbai along with a fee of Rs. 5000/- by Demand Draft in favour of compounding authority. 12.2. Rule 3 defines "compounding authority" as the persons authorised by the Central Government under sub-section (1) of section 15 of the said Act. It further states that the compounding authority could be either an officer of the Enforcement Directorate not below the rank of Deputy Director or Deputy Legal Adviser (DLA) or an officer of the Reserve Bank of India not below the rank of the Assistant General Manager. 12.3. From the reading of the above Rule, it is seen that the Chief General Manager, Reserve Bank of India is the designated "Compounding Authority" before whom petitioners had filed the compounding applications. 12.4. Rule 4 pertains to the power of the Reserve Bank of India to compound contravention and states that if any person contravenes any ....
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....sued to petitioners on 11.06.2008 and adjudication proceedings were initiated against petitioners before the date of filing of the compounding applications. 13.2. Rule 7 states that where compounding of any contravention is made after making of a complaint under sub-section (3) of section 16, such compounding shall be brought by the authority specified in rule 4 or rule 5 in writing, to the notice of the Adjudicating Authority and on such notice of compounding of the contravention being given, the person in relation to whom the contravention is so compounded shall be discharged. Rule 7 covers the present case. In effect it means that the authority specified in rule 4, i.e., the Reserve Bank of India is required to bring to the notice of the Adjudicating Authority, i.e., the respondent No.1 herein, the fact of compounding of any contravention, and on such notice of the compounding of the contravention is given, the person in relation to whom the contravention is so compounded shall be discharged. Reading of Rule 7 clearly envisages that the authority specified in Rule 4, i.e., Reserve Bank of India is required to bring to the notice of the Adjudicating Authority the fact of compoun....