TaxTMI 
TaxTMI 
2026 (5) TMI 206
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....he issuance of the subject Show Cause Notice :- 1.2 It was alleged that M/S Ultra Modern Export Pvt. Ltd. (herein after refer to as M/S UMEPL), New Delhi (Indian company) purchased 9,99,900 No. of equity shares of M/s Orissa Sponge Iron & Steel Ltd. (herein after refer to as M/s OSIL) (Indian company) from M/s Strepera Holding Ltd. (herein after refer to as M/s SHL), Cyprus (a non resident company) on 06.02.2009 for consideration of Rs. 14,19,85,000/- @ Rs. 142 per share and paid bank commission of Rs. 2,39,889/-. 1.3 The equivalent amount of USD 29,04,189 was paid through current account of M/s UMEPL to the bank account of M/s SHL. Earlier M/s SHL had purchased 10,00,000 equity shares of M/s OSIL on 20.02.2017. 1.4 An amount of Rs. 14,19,85,800 was paid to M/s SHL on account of purchase of 999900 equity shares of M/s OSIL through AD, Bank, PNB, New Delhi. The said amount was paid by M/s UMEPL in India to the account of M/s SHL in USD. An amount of Rs. 2,39,889/- was paid to the bank as remittance charge as per their schedule of charge which is approx. 0.169% of the transaction value. 1.5 Further, during the course of investigation, various docum....
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....the decisions with regard to purchase of share of M/s OSIL was taken by him only. 1.6.3 Statement of Shri Sushil Kumar Tyagi, Ex-Director of M/s UMEPL was recorded on 11.09.2017 wherein he stated that he was Director in M/s UMEPL during the period from 2007 to 2009 (August/September) and he did not know anything about the said purchase of shares by M/s UMEPL and Shri Sanjeev Kapoor can only say about the said purchase and the business affairs of M/s UMEPL. 1.6.4 Further statement of Shri Sanjeev Kapoor, Authorised Signatory of M/s UMEPL was recorded on 13.09.2017 wherein he stated that he is employed in M/s Dependable Transport Pvt. Ltd., an associate company of M/s Bhushan Steel Ltd. as an advisor. Earlier he was working with M/s Bhushan Steel Ltd. as Vice President. Further, Shri C.M. Mittal, the commercial head of M/s Bhushan Steel Ltd. (Earlier M/s Bhushan Steel and Strips Ltd.), Sahibabad asked him to render advice to M/s UMEPL and he used to inform him time to time relating to HR matters. Further relating to the matter of purchase or sale of shares he stated that he had dealt the matter to the extent of co-ordinating with the Chartered Accountant for providi....
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.... by a person Resident Outside India), Regulation, 2000 is as under:- "A person resident outside India, may transfer shares or convertible debentures or warrants of an Indian company, without the prior permission of the Reserve Bank of India, by way of sale, to a person resident in India subject to the adherence to pricing guidelines, documentation and reporting requirements for such transfers as may be specified by Reserve Bank from time to time." The relevant portion the Circular (RBI/2004-05/207 A.P. (DIR Series) Circular No.16 dated 04.10.2004 are as under:- "3.1: At present, the following categories of transfer of shares/convertible debentures by way of sale under private arrangement also require prior permission of Reserve Bank of India. Transfer by a person resident in India to a person resident outside India. Transfer by a person resident outside India to a person resident in India. 3.2 As a measure of further simplification of procedures, it has been decided to grant general permission and do away with the requirement of prior approval of Reserve Bank of India for transfer of share and convertible debentures in respect o....
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....6 dated Oct 4, 2004 but it was alleged that M/s UMEPL has submitted forged documents to the AD Bank as per the statement dated 22.03.2017 of the Chartered Accountant, Shri Sunil Singhal wherein he denied to have issued any such certificates to M/s UMEPL. 1.10 Further, in order to meet the provisions of RBI guidelines for purchase of shares of M/s OSIL from M/s UMEPL, it has submitted forged documents to the AD Bank, i.e. Punjab National Bank thus violating the provisions of FEMA, 1999. Accordingly, complaint was filed before the Adjudicating Authority. After receiving the aforesaid complaint the Adjudicating Authority, issued Show Cause Notices to all the Noticees (herein defendants). The Noticees gave their respective replies. Thereafter, the Adjudicating Authority, after hearing the rival submissions recorded the following material findings:- 4.5 Upon verifying the documents received from the AD Bank, Punjab National Bank, it appeared that M/s UMEPL has submitted various documents such as "letter of consent by seller and letter of consent by buyer issued by SHL, an undertaking, certificate by CA, Sunil Singhal and associates that SHL is not an overseas corpor....
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....orates that Shri Sunil Singhal has rendered his services to M/s UMEPL and for which he has issued invoice of Rs. 1124 to M/s UMEPL. It also corroborates the assertion of Noticees No. 1 to 5 that Shri Sunil Singhal has given false statement before the Enforcement Directorate that he has never issued nor signed any certificates to M/s UMEPL regarding the purchase of shares by M/s UMEPL. Further, the Noticees have also submitted certificates dated 06.09.2017 issued by Shri D.K. Saxena, Chartered Accountant from M/s Saxena and Saxena certifying that the records of M/s UMEPL have been examined and the fair value of share price of M/s OSIL purchased from M/s SHL on 06.02.2009 based upon quotation of share prices at Bombay Stock Exchange (BSE Code: 504864) as per guidelines of FEMA, 1999 vide Notification No. FEMA 20/2000-RB dated 03.05.2000 comes to Rs. 142 by taking average price of quotation (average of daily high & low) for preceding one week. Therefore, the contention of the complainant is not true that the Noticees have submitted forged documents signed by Shri Singhal and therefore there is no violation of Circular No. RBI/2004-05/207AP(DIR Series) Circular No. 16 dated 04th Octobe....
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....certifying fair value of share) and Annexure-B (As at Annexure-9 to the Complaint) all purported to be issued by M/s Singhal Sunil & Associates and signed by Sri Sunil Singhal on 06.02.2009, reveal that the signature in the OCB certificate is completely different from other two documents and signature in the other two documents i.e. fair value of shares and Annexure-B are also visibly different. He contended that all the signatures are completely different from the signature Sri Sunil Singhal, CA put at the time of recording of statement on 22.03.2017, when the documents were shown to him for verification. He argued that the adjudicating authority has erroneously believed the noticees without any scrutiny of the aforesaid three documents and wrongly discarded the statement dated 22.03.2017 of Sri Sunil Singhal, CA under Section 37 of FEMA, 1999. He stressed that the Adjudicating Authority, gave the benefit to the noticees, by relying on the false stories put-forth by them as regards telephonic discussion with Sri Sunil Singhal, CA and non-filing of police complaint by him for such forgery, filing of FIR by them, certificate issued by Sri D. K. Saxena during 2017, after eight years ....
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.... of due process of fair valuation has completely vitiated the transaction. He pointed out that the company M/s OSIL was in deep financial trouble during the relevant period of these transactions. Hence, the valuation of Rs.142/- needed thorough scrutiny. The Adjudicating Authority has failed to look into this aspect thoroughly. He submitted that therefore, the Adjudicating Authority has failed to adjudicate the case in a judicious manner as he has failed to apply himself to the critical issue of the pricing of the securities. He argued that just by relying the statement of the Directors of the company and summarily ignoring the statement of the Chartered Accountant, without any strong grounds, the adjudication has proceeded on very fallacious premises and reached untenable conclusions. Prayer is accordingly made to set aside the impugned order and thereby matter be remanded for imposing penalties on the defendants (herein respondents) as per law. 4. On the other hand, Ld. Counsel for the respondent submitted that the AA passed a well-reasoned and detailed order and thereby, rightly exonerated the noitcees (herein respondents) from the alleged charges. Prayer is accordingly made ....
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....to Police Station in-charge, Bhikaji Cama Police Post, New Delhi vide letter dated 16.09.2017 against Mr. Sunil Singhal for his denial of signing and issuing of the said certificates and for providing false statement before Directorate of Enforcement, of which the Copy has been submitted by Mr. Sanjeev Kapoor during the adjudication proceedings. (At para 4.7 of the order). Moreover, the transaction in question was carried out through authorized banking routes with full compliance of FEMA and RBI guidelines, including filing of requisite forms before the authorized dealer bank. In absence of any contrary material placed by the Appellant, mere suspicion regarding the source of money cannot substitute proof, particularly when documentary banking records clearly establish legitimacy of the transaction. Para 3.6 of the Impugned Order is mentioned below: Further, a reply dated 01.09.2018 was received from Punjab National Bank wherein it submitted that a remittance of USD 29,04,189 equivalent to Rs. 14,55,58,689/- was remitted by OTT No. 0036/09. The said transaction reported to RBI Mumbai vide form FC-TCR along with the original annexures was submitted by Punjab National Bank. P....