TaxTMI 
TaxTMI 
2024 (11) TMI 796
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 with Section 42 of FEMA, a penalty of Rs....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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) have complied with the provisions of Paragraph 9(1)(A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....osed, 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-compliance of procedural requirements." Ld. Counsel for the Respondent(s) pleaded that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate 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 resident outside India have been accepted after finding the same to be compliant of the requirements of the Company Act, Government approval, eligibility of the Company to issue shares and that the authorised deale....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d. 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 further cited the judgement dated 14.08.1977 of the Hon'ble Supreme Court in State of M.P. &Ors. v/s Bharat Heavy Electricals [(1977) 7 SCC 1] that even if provisions for penalty prescribed the maximum limit and if it does ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntinues." 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 under the Section is three times the amount of contravention involved. From the language of the Section, it is clear that the Section has not prescribed either a fixed amount of penalty or minimum amount of penalty. it therefore, follows tha....