TaxTMI 
TaxTMI 
2023 (12) TMI 786
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....NTERIM APPLICATION NO. 2059 OF 2020 IN FEMA APPEAL NO. 7 OF 2021 WITH FEMA APPEAL NO. 8 OF 2021 WITH INTERIM APPLICATION NO. 2060 OF 2020 IN FEMA APPEAL NO. 8 OF 2021 WITH FEMA APPEAL NO. 9 OF 2021 WITH INTERIM APPLICATION NO. 2061 OF 2020 IN FEMA APPEAL NO. 9 OF 2021 For the Appellants : Mr. Ashish Chavan, with Mr. Zishan Quazi, For the Respondents : Mr. Rohan P. Shah, with Mr. Roy Deep, Mr. Srisabari Rajan, Mr. Manish Rastogi & Prajwal Tiwari, i/b Deep Roy. JUDGMENT (PER DR. NEELA GOKHALE, J.) 1. These Appeals under Section 35 of the Foreign Exchange Management Act, 1999 ("FEMA") are directed against order dated 11th July 2019 passed by the Appellate Tribunal for SAFEMA, FEMA, NDPS, PMLA & PBPT Act ("the Tribunal"), modifying the order passed by the Special Director of Enforcement to the extent of reducing the quantum of total penalty imposed upon the Appellants which totaled to Rs. 98.35 Crores to Rs. 15 Crores only. The Tribunal has thus held that the amount of Rs. 15 Crores already deposited by Appellants pursuant to the directions of this Court dated 21st January 2015 is reasonable and the same be treated as penalty for the contravention of the Act as held by t....
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....pondent in FEMA Appeal No. 2 of 2020) from UK on behalf of Emerging Media IPL Ltd. Subsequently, the franchise agreement was signed on 14th April 2008 and the balance deposit money, i.e., US$ 773,480.99 after the auction was paid by one EM Sporting Holdings Ltd., Mauritius ("EMSH") (Respondent in FEMA Appeal No.7 of 2021) to BCCI. Thus, Manoj Badale and EMSH together paid a total amount of Rs. 23,49,27.410/-. The documents furnished by JIPL clearly showed that JIPL was a wholly owned subsidiary of EMSH. The date of incorporation of EMSH was 5th May 2008 and that of JIPL was 8th March 2008. The paid-up capital of the company at incorporation was Rs. 1 Crore having 10000 shares. Ranjit Barthakur (Respondent in FEMA Appeal No. 1 of 2021) and Fraiser Castellino, both Directors of JIPL owned 5000 shares each. Ranjit Barthakur sold 4990 shares to EMSH, Mauritius and Fraiser sold 5000 shares to EM Sporting Holdings, Mauritius. From the details of the foreign investments of JIPL, it was revealed that JIPL also received foreign investments through Axis Bank, Fort, Mumbai. The investments totaling Rs. 9,73,18,034/- were shown as Foreign Direct Investment ("FDI") in India in equity. JIPL had ....
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.... to the extent of Rs. 23,49,27,410.23 and Rs. 9,73,18,034/-. iv. Shri Ranjit Bharthakur, Shri Raghuram lyer, and Shri Fraiser Castelino have been charged for above contraventions in terms of Section 42(1) of FEMA, 1999. (ii) SCN II: Issued to EM Sporting Holdings Ltd., for contravention of: i. Section 6(2) of FEMA read with Regulation 5 of Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 and also read with para 8 of Schedule 1 to Regulation 5(1) of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 issued under section 6(3)(b) of FEMA, 1999, to the extent of Rs. 23,49,27,410/- and Rs. 9,73,18,034/- totalling Rs. 33,22,45,444/-. ii. Shri Bishwarnath Bachun, Mrs. Samila Sivaramen, Mrs. Barbara Jacqueline Haldi, and Shri Manoj Badale, Director of M/s EM Sporting Holdings Ltd., and Shri Suresh Chellaram, Managing Director & Chief Executive of M/s Chellarams PLC, Nigeria have been charged for above contraventions in terms of Section 42(1) of FEMA, 1999. (iii) SCN III: Issued to Shri Manoj Badale for contravention of Section (3)(b) of FEMA to ....
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....ver of the condition of pre-deposit of the penalty amount and stay of the order dated 30th January 2013. On account of a difference of opinion amongst the members of the Tribunal, the matter was placed before the Chairman for decision and upon consideration of respective opinion of individual members of the Tribunal, the Chairman directed Respondents to deposit 40% of the penalty as a pre-deposit in addition to furnishing a bank guarantee for the remaining 60% amount of the Adjudication Order. The pre-deposit direction was assailed by Respondents in this Court by way of an Appeal. By its order dated 24th December 2014, this Court admitted the Appeals on three substantial questions of law, and after hearing the parties, this Court was pleased to conclude that the imposition of condition of cash deposit and bank guarantee failed to meet the ends of justice. Thus, by another order dated 21st January 2015, this Court was pleased to substitute the pre-deposit order of the Tribunal and directed Respondents to deposit total amount of Rs. 15 Crores within eight weeks from the date of receipt of the order. This Court also directed the Tribunal to dispose the Appeals uninfluenced by its p....
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....0 TOTAL 98.35 15.00 9. Mr. Ashish Chavan, learned Counsel for Appellants has criticized the findings of the Tribunal by saying that the Tribunal ought not to have taken a lenient view and has erred in holding the contraventions of the provisions of FEMA by Respondents as merely technical. Mr. Chavan submitted that the Tribunal ought to have appreciated that the arrangement of the flow of funds by Respondents was made to route the investments through Mauritius as the funds flowing into India from UK was not permissible especially in the light of admitted fact that they did not have the approval of the RBI and the FIBP. Further, the Tribunal has not recorded any justification in reducing the quantum of penalty especially in view of the gross contraventions of the provisions of the FEMA by Respondents which caused a significant loss to Government exchequer. So saying, he proposed as many as sixteen questions of law terming them to be 'Substantial Questions of Law' that needed to be determined by this Court. 10. On the other hand, Mr. Rohan Shah, Counsel appearing for Respondents defended the impugned order by drawing our attention to various decisions ....
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....h other albeit having only an interchangeability of words. We thus, do not find any reason to dwell on the questions individually as placed for consideration by Appellant. The only issue that arises for our consideration is whether interference by the Tribunal in the order of the Special Director is justified on the touchstone of the doctrine of proportionality. 13. The order of the Special Director clearly indicates that although satisfaction in respect of contravention of the provisions of the FEMA has been recorded, there is no explanation or any discussion in respect of the basis on which maximum penalty has been imposed. Mr. Chavan, in fairness, agreed. It appears that the Special Director has taken the sum involved in the contravention as alleged by the Investigating Officer of the Enforcement Directorate and multiplied it by three to arrive at the quantum of penalty as contemplated by Section 13(1A) of the FEMA. The Tribunal, on the other hand, after going through each charge, has recorded a clear finding that an exorbitant penalty has been imposed upon the individuals arrayed without recording any findings on the specific roles of said individuals. Judicial precedents cl....
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....signed from the directorship of JIPL in 2016. All the respective remittances took place when Raghuram Iyer was not a Director and hence, imposition of maximum penalty on him was held to be completely unjustified. (d) Bishwarnath Bachun (Respondent in FEMA Appeal No. 3 of 2021) did not have any role in the daily operations of EMSH and was not in overall control of its business. The remittances attributed to Bishwarnath Bachun were made at a time when he was not even involved with the affairs of the group. (e) Samila Sivaramen (Respondent in FEMA Appeal No. 9 of 2021) was also a representative of Tresco International Limited, one of the shareholders of the EMSH and also had no role in the daily operations of the EMSH. She was not even aware of the remittances attributed to her as EMSH was neither in existence nor had operational bank account at that point of time. There is no justification of imposing any penalty on Samila Sivaramen. (f) In reference to Barbara Haldi (Respondent in FEMA Appeal No.5 of 2021), the Tribunal has found her to be mere nominee Director of EMSH and had no role in the daily operations of EMSH. She was also not aware of any remittanc....
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....case of Sir Shadilal Sugar and General Mills (supra), while dealing with the issue as to whether there was justification for an interference by the High Court in a finding of fact by transforming the same into the question of law, the Apex Court has held as follows: "14........This Court reiterated that findings on questions of pure fact arrived at by the Tribunal were not to be disturbed by the High Court on reference unless it appeared that there was no evidence before the Tribunal upon which they, as reasonable men, could come to the conclusion to which they have come; and this was so, even though the High Court would on the evidence have come to a conclusion entirely different from that of the Tribunal. In other words, such a finding could be reviewed only on the ground that there was no evidence to support it or that it was perverse. 15. ........Where an ultimate finding on an issue was an inference to be drawn from the facts found, on the application of any principles of law, there would be a mixed question of law and fact, and the inference from the facts found was in such a case, a question of law. But where the final determination of the issue equally wit....
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....retion of the authority to be exercised judicially or on a consideration of all relevant circumstances..........." 21. In Coimbatore District Central Co-operative Bank (supra), the Supreme Court has explained the concept of proportionality in the following manner: "18. 'Proportionality' is a principle where the Court is concerned with the process, method or manner in which the decision maker has ordered is priorities, reached a conclusion or arrived at a decision. The very essence of decision making consists in the attribution of relative importance to the factors and considerations in the case......... 19.........the principle of proportionality needs to be imbibed in to any penalty imposed under Section 27 of the Act. Otherwise excessively high fines may over-deter, by discouraging potential investors which is not the intention of Act.................." 22. We find that the Special Director has completely failed to apply the doctrine of proportionality as interpreted and elucidated by the Apex Court in its various decisions, while choosing to impose maximum penalty on Respondents. Having gone through the impugned order, this Court does not find any....