TaxTMI 
TaxTMI 
2026 (4) TMI 377
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....ign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulation 2000, in terms of Paragraph 9 (1) (A) of Schedule 1 to the said Regulation to the extent of Rs. 7,21,00,000/-. Further penalty of Rs. 1,00,000/- was imposed on Shri Sanjay Kumar Agarwal, Managing Director of Company for the contravention of aforementioned provisions in terms of Section 42 of FEMA. Penalties of Rs. 2,00,00,000/- and Rs. 1,00,00,000/- were imposed on M/s Keshav Castings Private Ltd. for the contraventions of Section 6(3)(b) of the FEMA read with Regulation 5 (1) (i) of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulation 2000, in terms of Paragraph 8 of Schedule I to the said Regulations to the extent of Rs. 4,69,00,000/- and Rs. 2,52,00,000/- respectively. The contravention in terms of Paragraph 8 of Schedule I to the said Regulations to the extent of Rs. 4,69,00,000/- occurred for not issuing the shares and by retaining the said amount without the permission of the Reserve Bank of India (RBI) beyond the expiry of the period of 180 days from the date of its receipt. The contravention in terms of Paragraph 8 of....
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....ed in the balance sheet as long term loan. The Ld. AA erred in making a finding that the amount was towards issue of shares. Ld. Counsel also pleaded that the penalty imposed was highly exorbitant. Ld. Counsel for the Appellants therefore pleaded to allow the Appeals. 4. Ld. Counsel for the Respondent Directorate submitted that Shri Sanjay Kumar Agarwal is an Indian Passport holder No. G2689742 issued at Abu Dhabi and having PAN Card No. AAUPA5641H. Shri Sanjay Kumar Agarwal was residing at Villa No. 24 Palm Oasis, Abu Dhabi, UAE. Originally, KCPL was promoted by Shri Sanjay Kumar Agarwal and Shri Mahender Kumar Goel with an Authorised Capital of Rs. 5,00,000/-. Smt. Asha Agarwal, Smt. Manju Agarwal and Shri Sanjay Kumar Agarwal, were the Directors of the Company. The Authorised Capital of the Company was Rs. 50,00,000 and paid-up capital was Rs. 31,90,000. Shri Sanjay Kumar Agarwal and his wife Smt. Asha Agarwal held 91% of the total equity of the Company (2,60,100 equity shares in the name of Smt. Asha Agarwal and 30,000 equity shares in the name of Shri Sanjay Kumar Agarwal). Shri Sanjay Kumar Agarwal opened NRE Account bearing No.631601076862 with ICICI Bank Limited, Sector-....
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....garwal) and Shri Sanjay Kumar Agarwal, were the Directors of KCPL. The authorised share capital of the Company increased to Rs. 50 Lakhs. KCPL started its branch at Visakhapatnam in the year 2007 for the sole purpose of Export of Blast Furnace Slag procured from M/s Rashtriyaispat Nigam Limited. Shri Sanjay Kumar Agarwal, an NRI resided in Abu Dhabi. Shri Sanjay Kumar Agarwal held 30,000 shares of Rs.10 each out of Rs. 3,19,000 shares in KCPL. Shri Sanjay Kumar Agarwal left India in the year 2007 for employment purpose. Shri Sanjay Kumar Agarwal was the Managing Director of M/s Super Cement Manufacturing Company L.L.C., a limited liability company registered in the Emirates of Abu Dhabi. Shri Sanjay Kumar Agarwal remitted via Telegraphic/Money Transfer periodically to ICICI Bank in the NRE account bearing No.631601076862, 'to create FCNR' etc. The total amount transferred in the said account during the period from 12.10.2011 to 22.11.2012 was Rs. 7,51,00,564. Shri Kamal Grover was not aware as to whether Shri Sanjay Kumar Agarwal had invested any amount in M/s Super Cement Manufacturing Company L.L.C., Abu Dhabi. Shri Sanjay Kumar Agarwal had not invested in any foreign com....
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....Exchange Management (Transfer or Issue of security by a person resident outside India) Regulations, 2000; c) The third charge is that Noticee 1 have neither issued Share Certificates nor refunded the Foreign Investment within 180 days of receipt of FDI and have not yet taken any permission from RBI for repatriating to the tune of Rs. 2,52,00,000 after the stipulated period of 180 days for the period from January, 2012 to July, 2013, and have thus contravened the provisions of Section 6(3)(b) of FEMA, 1999 read with Regulation 5(1) in terms of Paragraph 8 of Schedule 1 to Foreign Exchange Management (Transfer or Issue of security by a person resident outside India) Regulations, 2000; d) It was alleged that as person in-charge of the activities of M/s. KCPL, Shri Sanjay Kumar Agarwal, Director of M/s. Keshav Castings Pvt. Ltd. and Shri Kamal Grover, Manager of M/s. Keshav Castings Pvt. Ltd. have contravened the above said provisions of FEMA, in terms of Section 42 of FEMA." 8. Ld. Counsel for the Respondent Directorate stated that the Ld. AA had found that the following facts were not disputed by both the sides: "i. Noticee 1 received a total investment ....
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....ue of Security by a Person Resident Outside India) Regulation 2000 read with Schedule 4 to the said Regulations. 10. The aforementioned provisions of the Regulations 2000 are reproduced below: "5. Permission for purchase of shares by certain persons resident outside India: (1) A person resident outside India (other than a citizen of Bangladesh or Pakistan or Sri Lanka) or an entity outside India, whether incorporated or not, (other than an entity in Bangladesh or Pakistan). may purchase shares or convertible debentures of an Indian company under Foreign Direct Investment Scheme, subject to the terms and conditions specified in Schedule 1. (2) A registered Foreign Institutional Investor (FII) may purchase shares or convertible debentures of an Indian company under the Portfolio Investment Scheme, subject to the terms and conditions specified in Schedule 2. (3) A non-resident Indian or an overseas corporate body may purchase shares or convertible debentures of an Indian company- (i) on a stock exchange under the Portfolio Investment Scheme, subject to the terms and conditions specified in Schedule 3; or/and (ii) on non-repatria....
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....xes) of shares or convertible debentures purchased under this Scheme shall be credited only to NRSR account where the purchase consideration was paid out of funds held in NRSR account and to NRO or NRSR account at the option of the seller where the purchase consideration was paid out of inward remittance or funds held in NRE/FCNR/NRO/NRNR account. ii) The amount invested in shares or convertible debentures under this Scheme and the capital appreciation thereon shall not be allowed to be repatriated abroad." 11. We find from the material on record that the transfer of the funds by the individual Appellant was not on non-repatriation basis. The investigation has revealed from not only the statement tendered by Shri Kamal Grover on 29.08.2013 under Section 37 of FEMA as Authorized Representative of both the Appellants, but also from the statement of the bank account of the Appellant Company maintained with ICICI Bank Ltd. in Vishakhapatnam that repatriation had in fact occurred from the fund that had been transferred by the individual Appellants. It is an admitted fact that no share was issued by the Appellant Company, and therefore there could not have been repatriation f....
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.... Regulation 5 (1) of the Regulations, 2000 is inescapable. 12. Since the transfer of funds of Rs. 7.21 Crores from the individual Appellant to the Appellant Company is covered by the provisions of Regulation 5 (1) of the Regulations, 2000, the stipulations under the said Regulations need to be satisfied. It is an admitted fact that no intimation has been reported by the Appellant Company to the RBI as required under Paragraph 9 (1)(A) of Schedule 1 to the said Regulations, 2000. The Appellants have pleaded that they were not aware of the legal provisions particularly since the transfer of funds occurred from the Director of the Company himself cannot be accepted. 13. The Appellants have also challenged the amounts which were actually repatriated and which were retained in the country. In this regard, we agree with the findings made by the Ld. AA in paragraphs 5.11 & 5.12 of the Impugned Order. We reproduce the findings: "5.11 .........It was alleged in the Show Cause Notice that out of Rs. 7.21 Crores received by Noticee 1 Rs. 2.52 Crores have been repatriated back to the remitter after 180 days, and Rs. 4.69 Crores were retained by the company without issue of share....
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....tions shall remain the same. Thus, in absence of clear evidences in this regard, I would like to examine only the allegations made in the Show Cause Notice sticking to the amounts mentioned therein. As per the Show Cause Notice Rs. 2.52 Crores has been repatriated in 2013 and Rs. 4.69 Crores has been retained without issuing any share certificates to that extent. The fact of non-issuance of shares certificates till date has been admitted by the Noticees. Accordingly, I hold that the Noticee 1 is guilty of contravening Section 6(3)(b) of FEMA read with Regulation 5(1) of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, in terms of paragraph 8 of the Schedule 1 to the said Regulations, to the extent of Rs. 4,69,00,000/-. 5.12 I find from the material available on record and as admitted by the Noticees as explained above, that Rs. 2,52,00,000 has been repatriated to the remitter after the stipulated period of 180 days without permission of Reserve Bank of India. The Show Cause Notice alleges repatriation of Rs. 2.52 Crores whereas the Noticees themselves have furnished bank statements stating that they have repa....
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....hall, 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 Mutual Fund, [(2006) 5 SCC 361] has held: "35. In our considered opinion, penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and the Regulations is established and hence the intention of the parties committing such violation becomes wholly irrelevant. A breach of civil obligation which attracts penalty in the nature of fine under the provisions of the Act and the Regulations would immediately attract the levy of penalty irrespective of the fact whether contraventio....