TaxTMI 
TaxTMI 
2024 (11) TMI 796
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....ZO/01/2022(SA) dated 09.02.2022 passed by the Special Director (Eastern Region), Directorate of Enforcement, Kolkata. The Ld. Adjudicating Authority imposed a penalty of Rs 10,00,000/- on M/s Orissa Sponge Iron & Steel Ltd ("Respondent No. 1") for the contravention of Paragraph 9(1)(B) of the Schedule 1 to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 ("FEMA Regulations, 2000") as notified by the Reserve Bank of India (RBI) vide Notification No. FEMA 20/2000-RB dated 03.05.2000 in terms of exercise of the powers conferred by Clause (b) of Sub-section (3) of Section 6 and Section 47 of the Foreign Exchange Management Act, 1999 (FEMA). For the aforementioned contravention read....
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....ued that the penalty imposed under the impugned order is bereft of any rationale as it is the result of arbitrary exercise of discretion by the Ld. Adjudicating Authority. The Ld. Counsel furthermore argued that the meagre and insufficient penalty frustrates the purpose and object of the FEMA Act, 1999, and it would thus fail to secure the strict compliance to the Act and its Regulations. 5. Ld. Counsel further stated that the Respondent No. 1 has not as yet complied with the said requirement of reporting/ submitting Form FC-GPR. The Ld Counsel for the Appellant prayed for allowing the present appeal so as to enhance the penalty amounts imposed on the two Respondents. 6. Ld. Counsel for the Respondents stated that the Respondent(s) ha....
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....as stated the reasons for the amount of penalties imposed, which are as follows: "I have given due regard to the following factors in determining the penalty amount for the aforesaid contraventions: i. there does not appear to be any allegation or evidence that there was any disproportionate gain or unfair advantage to Noticee. However, the fact remains that it was not compliance of regulatory requirements. ii. there is no allegation or evidence about loss of foreign exchange as a result of the said contravention. iii. the declared purpose of the foreign inward remittance was "sale of shares of the company" and the same was utilized for the stated purpose only. iv. the contravention is about non-....
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....ese Regulations; (d) the company has all original certificates issued by authorised dealers in India evidencing receipt of amount of consideration in accordance with paragraph 9; ii) a certificate from Statutory Auditors or Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India." 9. From the aforecited provisions, it is obvious that Paragraphs 9(1)(A) and 9(1)(B) are part of the Schedule 1 of Regulation 5(1) of FEMA Regulations, 2000 to serve specific purposes specified therein. Paragraph 9(1)(B) requires submission of a report in Form FC-GPR so as to inform RBI through certificates issued by the Company Secretary that the investments from persons r....
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.... the RBI. In fact, the Appellant Director in his statement dated 15.02.2021, under Section 37 of FEMA has admitted that they had not submitted FC-GPR to the RBI as they were not aware of such requirement. 11. The Ld. Counsel for the Respondents has argued that there was no mens rea on the part of the Appellant. She relied upon the judgement dated 04.08.1969 of the Hon'ble Supreme Court in Hindustan Steel Ltd. V/s State of Orissa[(1969) 2 SCC 627] that an order imposing penalty for failure to carry out a statutory obligation is the result of quasi-criminal proceeding and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or acted in conscious disregard of its obligation. She furthe....
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.... up to two lakh rupees where the amount is not quantifiable, and where such contravention is a continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues." Reading of Section 13 of FEMA,1999 which is a Section under which penalty is imposed for contravention of any of the provisions of the Act or any Rule, Regulation, Notification, Direction, Order or any condition subject to which an authorization is issued by the RBI makes it obvious that the language of the Section does not require intention for penalizing of contravention. 13. On reading of Section 13 (1) FEMA, 1999, it is also obvious that the maximum amount of penalty which can be imposed un....