AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 108
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....a, Hyderabad Zonal Office. Penalty of Rs. 25,00,000/- was imposed on the Appellant Shri Jignesh Arvind Shah, vide the Impugned Order for the contravention of Section 6 (3) (b) of the Foreign Exchange Management Act, 1999 (FEMA) read with para 8 of Schedule I to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulation 2000, in terms of Section 42 of FEMA. 2. Ld. Counsel for the Appellant submitted that the Appellant is a resident of Mumbai engaged in his family's chemical business since 1985. The Appellant is a Director in two small-scale manufacturing units, M/s Poona Finechem Pvt. Ltd. and M/s Sanghvi Organics Pvt. Ltd. Ld. Counsel for the Appellant submitted that Dr. Dayal T. Meshri ....
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....07, became Director in 2009. Shri Raverkar was responsible for regulatory compliance, including foreign investment reporting, and was the only Director drawing a salary, as reflected in the audited financial statements. 3. Ld. Counsel for the Appellant submitted that the Appellant believed that the amount of Rs. 5,49,96,598 received between 14.10.2010 and 15.08.2012 was a loan, since the company's Auditor classified it as such from FY 2012-13 to 2015-16. The Foreign Inward Remittance Certificates also described the funds as project-related. From the documents later shared by the Respondent, the Appellant learned that the parent Company, AFT LLC, had on 30.03.2018 informed that due to heavy losses, AFTPL could not allot shares or refund t....
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....ff the remitted amount, which was originally sent to meet project expenses. Thus, the alleged contravention is purely technical and has caused no prejudice to the exchequer or to the foreign investor. 5. Ld. Counsel for the Appellant submitted that the Authority further overlooked the provisos to Para 8 of Schedule 1 of the Regulations 2000. The first proviso requires refund of the remittance, if shares are not issued within 180 days. However, in this case, the parent Company, through its letter dated 30.03.2018, expressly waived its right to seek refund, and therefore had no grievance. Even assuming the amount to be Share Application Money, neither the foreign investor nor the Government suffered any loss, making the impugned order ineq....
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....fide and taken without reasons, just to evade the legal consequences. The Board resolution passed by the shareholders in their extra ordinary meeting dated 29.01.2019 appointing Shri Raghu Babu Ghuntru as Liquidator was informed to RBI, wherein RBI vide its letter dated 05.03.2019 categorically clarified that such types of write off are not permitted under the provisions of FEMA, 1999, hence, such claim that the Company has gone in liquidation and therefore need not be held responsible for any omission and commission, has explicitly been denied by the RBI being not in consonance with provisions of FEMA. 7. Ld. Counsel for the Respondent submitted that M/s Advanced Fluorine Technologies Private Limited has contravened the provisions of Se....
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....ty was imposed on the Company and others under Section 13(1) of FEMA, 1999. 8. We have considered the rival submissions of both the parties and the material placed on record. We find that the primary issue concerns the alleged non-issuance of shares within 180 days of receipt of foreign remittance amounting to Rs. 5,49,96,598 by M/s Advanced Fluorine Technologies Pvt. Ltd. (AFTPL) and the consequent liability of the Appellant, who was the Managing Director during the relevant period. It is undisputed that the aforementioned contravention occurred in so far as the Company AFTPL is concerned. We find that vide the Order dated 13.03.2024 of this Tribunal, the Appeal No. FPA-FE-110/HYD/2020 filed by the Company M/s Advanced Fluorine Technolo....
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.... condition subject to which an authorisation is issued by the Reserve Bank, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where such amount is quantifiable, or 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." Thus, there is nothing in the Section which can indicate directly or indirectly requirement of mens rea. Words like "willful", "deliberately", "intentionally" etc. are missing. The Hon'ble Supreme Court in the Judgment dated 23.05.2006 in the matter of The Chairman, SEBI v. Shriram Mu....