TaxTMI 
TaxTMI 
2026 (5) TMI 380
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....9 (FEMA), and Rs. 15,00,000/- on Shri Amit Bhatia for the aforementioned contravention in terms of Section 42(1) of FEMA. Further penalty of Rs. 1,50,00,000/- was imposed on M/s. Thomas Cook India Ltd. for the contravention of Section 3(a) of FEMA and penalty of Rs. 15,00,000/- on Shri Amit Bhatia for the aforementioned contravention in terms of Section 42(1) of FEMA. Penalty of Rs. 1,20,00,000/- was imposed on the Appellant Shri Amit Bhatia, for contravention of Section 10(6) of FEMA read with Regulation 6(1) of Foreign Exchange Management (Realization, Repatriation and Surrender of Foreign Exchange) Regulation 2000 in terms of Section 13(1) of FEMA. The amount involved in the aforementioned contravention was SGD 2944150 equivalent to Rs. 14,29,72,117/-. 2. Ld. Counsel for the Appellants submitted that the Impugned Order is bad in law, arbitrary and in violation of principle of natural justice as no opportunity to file a reply on merits and personal hearing to argue on merits was granted. Moreover, under Rule 5 & 6 of the Adjudication Proceedings and Appeal Rules, 2000, which specifically requires the Ld. AA to give multiple hearings and enforce the attendance of any person acq....
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....s, wherein summons were issued to the Appellants, as well as to the passengers and certain other persons. In fact, Shri Amit Bhatia appeared before the Investigating Authority on 27.11.2018 and tendered his statement. Therefore, under such circumstances there was no delay. Ld. Counsel also contended that even though the Appellant Company was an Authorised Person it engaged in transactions with unauthorized individuals releasing foreign exchange without complying with mandatory stipulations leading to loss of Rs. 14.23 Crores of foreign exchange. Thus, the argument that Section 13 of FEMA does not cover such transactions is baseless. Ld. Counsel stated that the Appellant had released foreign exchange in the form of pre-paid forex cards in the name of 255 passengers who had not even traveled. The allegation that the SCN was pre-determined cannot hold. Ld. Counsel denied that there is any violation of principles of natural justice for not having been granted cross examination. In this regard, he cited the following Judgments in Kanungo & Company v. Collector of Customs & Ors. (1973) 2 SCC 438, Telstar Travels Private Limited and Ors. vs. Enforcement Directorate (2013) 9 SCC 549 and Bi....
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....transmitted funds to the Appellant Company for issuing of Forex Travel Pre-Paid Cards. It is also on record that another FFMC M/s Sree Chakra Forex Pvt. Ltd. transmitted funds amounting to Rs. 70,86,552/- to the Appellant Company for issuing the Forex Travel Pre-Paid Cards. In the face of such detailed investigations having been conducted in such meticulous manner by the Respondent Directorate, the contention of the Appellants that there was delay in issuing the Complaint and the SCN, is baseless and cannot be sustained. 6. In the Judgment State of Punjab v. Bhatinda District Coop. Milk Producers Union Ltd. 363 (2007) 11 Supreme Court Cases 363, the Hon'ble Court stated that the statutory authority must exercise jurisdiction within a reasonable period even if no period of limitation has been prescribed under the statute. The Hon'ble Court has gone on to state that what should be the reasonable period would depend upon the nature of the statute, rights and liabilities thereunder and other relevant factors. This is further clarified in the Judgment in the matter of Chennai Metropolitan Water Supply and Sewerage Board and Others vs. T. T. Murali Babu (2014) 4 Supreme Court Cases 10....
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....h his legal practitioner or a chartered accountant duly authorised by him. 4. On the date fixed, the Adjudicating Authority shall explain to the person proceeded against or his legal practitioner or the chartered accountant, as the case may be, the contravention, alleged to have been committed by such person indicating the provisions of the Act or of rules, regulations, notifications, direction or orders or any condition subject to which an authorisation is issued by the Reserve Bank of India in respect of which contravention is alleged to have taken place. 5. The Adjudicating Authority shall, then, given an opportunity to such person to produce such documents or evidence as he may consider relevant to the inquiry and if necessary, the hearing may be adjourned to a future date and in taking such evidence the Adjudicating Authority shall not be bound to observe the provisions of the Indian Evidence Act, 1872 (1 of 1872). 6. While holding an inquiry under this rule the Adjudicating Authority shall have the power to summon and enforce attendance of any person acquainted with the facts and circumstances of the case to give evidence or to produce any document ....
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....o alleged contravention but only for the purpose of deciding whether an inquiry should be held against him or not. Every such notice is required to indicate the nature of contravention alleged to have been committed by the person concerned. That after taking the cause, if any, shown by such person, the Adjudicating Authority is required to form an opinion as to whether an inquiry is required to be held into the allegations of contravention. It is only then the real and substantial inquiry into allegations of contravention begins." We find that the SCN in the matter was issued on 30.03.2019 by the Adjudicating Authority viz the Additional Director, Enforcement Directorate, Chennai. It is matter of record that the SCN was received by the Appellants in the month of April, 2019, as evident from the Acknowledgement Cards. The Appellants through their Counsel vide letter dated 06.05.2019 sought relied upon documents, which were furnished to their Counsel on 10.06.2019. It is also a matter of record that the Appellant Company vide letter dated 14.10.2019 replied to the SCN raising issue relating to jurisdiction of the Respondent Directorate, the delay in issuing SCN, the Appellant Comp....
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....dvised to file final submissions immediately." We therefore do not find that the provisions of Rule 4 (supra) have been contravened. The interpretation in the Judgment (supra) in the matter of Kanwar Natwar Singh has been satisfied. The compliance becomes evident on reading of paragraph 21 of the Judgment Shashank Vyankatesh Manohar vs. Union of India & Others [2013 (5) ALL MR 551], cited by the Appellant: "Thus, in view of the above discussion, we are of the view that Adjudicating Authority after issuing show cause notice and receiving objections to the notice from the noticee, is required to apply his mind to the objections by recording his reasons for forming an opinion on the file. This exercise need not be preceded by personal hearing and the order to be passed on the objections is not required to be detailed order, but it must disclose some link with the objections raised by the noticee and the opinion formed by the Adjudicating Authority. This recording of the opinion of the Adjudicating Authority would be given to the noticee when the proceedings are dropped in the form of an order. However, in cases where the opinion is formed to proceed further with the show c....
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....r not, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) every artificial juridical person, not falling within any of the preceding sub-clauses, and (vii) any agency, office or branch owned or controlled by such person;" It is useful to cite how this question raised by the Appellants before the Ld. AA has been disposed of in paragraph 5.12 of the Impugned Order: "5.12 With regard to the contention of Noticees 1&2, that they being Authorised dealers cannot be charged by ED and only RBI can adjudicate the Authorised persons, I find that, there is no bar on this Directorate from adjudicating a case involving Authorised Dealers for the violation of Chapter III of FEMA, 1999. It is to be noted that Section 13(1) of FEMA 1999 clearly states that if any person contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under this Act, or contravenes any condition subject to which an authorisation is issued by the Reserve Bank, he shall be upon adjudication, liable to penalty. Section 13 of FEMA specifies "any person" which will very well include "authorised persons" also.....
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....,000/- where the amount of contravention is not quantifiable or penalty of Rs. 5,000/- everyday for continuing contravention. Mere reading of the provisions makes it obvious that the existence of Chapter III of FEMA does not either preclude or curtail the powers bestowed under Section 13 of FEMA. Ld. Counsel for the Appellant argued that Section 3 (a) cannot be invoked against the Appellant Company which is an Authorised Dealer / Full Fledged Money Changer and only Sections 10(4) & 10(5) of FEMA can be invoked and adjudicated under Section 11 of the Act. A Full-Fledged Money Changer who has been given a licence to operate under certain conditions and obligations cannot have the liberty to contravene various provisions of FEMA 1999 and plead that only RBI can adjudicate the contraventions under Section 11. Section 13 of FEMA 1999 itself provides for imposition of penalty for contravention of any condition subject to which an authorization is issued by the Reserve Bank of India. Section 3(a) requires that no person shall deal in or transfer any foreign exchange or foreign security to any person not being an authorized person, save as otherwise provided. Therefore, it follows that the....
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....lowing: "It is seen that M/s TCIL have entertained Shri K. Ganesan, proprietor of M/s Abi Export and Import, unknown and unrelated person of other than the actual travellers, accepted the 4 DDs to the tune of Rs. 16,84,448/-along documents including copies of passports, visas, travel tickets (as given in para 8 above) and allowed Shri Ganesan to file Application for release of foreign exchange, etc. and initiated process of issuance of forex cards in the names of the passengers mentioned in the Annexure, loaded the forex prepaid cards and also handed over the said forex cards to the said Shri K. Ganesan, a unknown/unrelated/ third party person under Cash Memo." Besides rejecting the prayer for cross examination by citing the two Judgments of M/s Kanungo & Co., Vs. Collector of Customs, Kolkata & Others and Shri J. Ibrahim, S/o Jainulabdeen vs. The Special Director, ED, [2000 (4) CTC 298], the Ld. AA made the following findings in paragraph 5.14 of the Impugned Order: "With regard to the contention that there is no direct link between Noticee 1 on one hand and Noticees 4 and 5 on the other which demonstrate that such transactions with these persons are in violat....
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....ith these aspects in the present case as the issue relates to giving of notice before taking action. While emphasizing that the principles of natural justice cannot be applied in straight-jacket formula, the aforesaid instances are given. We have highlighted the jurisprudential basis of adhering to the principles of natural justice which are grounded on the doctrine of procedural fairness, accuracy of outcome leading to general social goals, etc. Nevertheless, there may be situations wherein for some reason - perhaps because the evidence against the individual is thought to be utterly compelling - it is felt that a fair hearing 'would make no difference' - meaning that a hearing would not change the ultimate conclusion reached by the decision-maker - then no legal duty to supply a hearing arises. Such an approach was endorsed by Lord Wilberforce in Malloch v. Aberdeen Corporation [(1971) 2 All ER 1278 (HL)], who said that a 'breach of procedure...cannot give (rise to) a remedy in the courts, unless behind it there is something of substance which has been lost by the failure. The court does not act in vain'. Relying on these comments, Brandon LJ opined in Cinnamond v....
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....ce Act be found fault with. At any rate, the disclosure of the documents to the appellants and the opportunity given to them to rebut and explain the same was a substantial compliance with the principles of natural justice. That being so, there was and could be no prejudice to the appellants nor was any demonstrated by the appellants before us or before the Courts below. The third limb of the case of the appellants also in that view fails and is rejected." 14. In this regard, we find support from the three Judge Bench Judgment of the Hon'ble Supreme Court in State of U.P. v. Sudhir Kumar Singh, [(2021) 19 SCC 706]. The relevant paragraphs are extracted below: "42. An analysis of the aforesaid judgments thus reveals: 42.1. Natural justice is a flexible tool in the hands of the judiciary to reach out in fit cases to remedy injustice. The breach of the audi alteram partem rule cannot by itself, without more, lead to the conclusion that prejudice is thereby caused. 42.2. Where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejud....
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....nsistent stand that the cross-examination of the Investigating Officers is not necessary unless compelling reasons are brought forth. In fact, cross-examination of those witnesses who have produced documents has also not been found necessary. The disclosure of the documents to the Appellants and the opportunity given to them to rebut and explain the same has been regarded as substantial compliance with the principles of natural justice. 16. We observe that under the facts and circumstances of the present case the denial of cross examination has neither resulted in prejudice to the Appellant nor caused violation of principles of natural justice. It is on record that the funds from M/s Sree Chakra Forex Pvt. Ltd. and Shri K. Ganesan were received by the Appellant Company. It is also on record that the Forex Travel Pre- Paid Cards were issued in the names of unknown persons, whose details had been forwarded by M/s Sree Chakra Forex Pvt. Ltd. and Shri K. Ganesan, as has been admitted by the Appellants. We observe that during the investigation by the Respondent Directorate, it was found that the Appellant Company had received Rs. 70,86,552/- from M/s Sree Chakra Forex Pvt. Ltd. for i....
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....produced below: "i) I find that to get release the above-mentioned foreign exchange illegally, some unauthorised person(s) had misused the identity of said passengers by submitting copies of their passport and visa to M/s TCIL for the said purpose. Admittedly, when approached, M/s TCIL have entertained the said unauthorised person(s) other than the actual passengers flouting the norms prescribed by RBI as detailed above. ii) I also find that filled in printed applications/forms of M/s TCIL for releasing foreign exchange, which included Declaration/Undertaking under FEMA which are supposed to be obtained from actual passengers with their signatures, were also been obtained from the said unknown person(s) without verifying the passengers in whose name the foreign exchange is issued. iii) Further, on receipt of payments through RTGS/DD which got credited into their bank account received from the unknown remitters, other than the passenger, have knowingly, released foreign exchange and sold, loaded and handed over the forex prepaid cards to those unknown and unauthorised person(s) issued in the names of the 255 passengers as detailed in Para 2.31 above. ....
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....rahim's) instructions he had carried out the transaction and would provide details or get the said Ibrahim in the investigation; however, he did not able to sustain his deposition in this regard. It was found from the banks transactions and documents under his (K. Ganesan) signature and he was aware of the same as he had admittedly monitored all his banks account transactions. It is also evident from the information provided by ICICI Bank. viii) With regard to the transactions of sale and loading of forex cards dealt against payments in the mode of DDs, I found that, Shri K. Ganesan has admitted in his statement that he used to visit the FFMCs to submit the DDs and documents. On the basis of Shri Ganesan's statement of corroborative evidence, it is clear that M/S TCIL were never approached by the listed passengers, in whose name the said prepaid forex cards were issued, for applying/obtaining and loading of forex cards. ix) M/s TCIL being AD-II, is responsible for compliance with applicable laws and regulations including KYC norms stipulated by RBI. x) Shri Amit Bhatia of M/S TCIL, in his statement has admitted that their lower staff have not acte....
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....erefore, the Ld. AA imposed penalty of Rs. 15,00,000/- on the individual Appellant under Section 42(1) of FEMA for the contraventions of Sections 10(4) and 10(5) of FEMA, indulged in by the Appellant Company. Further penalty of Rs. 15,00,000/- was imposed on the individual Appellant under Section 42(1) of FEMA for the contraventions of Section 3(a) of FEMA by the Appellant Company. Ld. AA also made the following findings in paragraph 5.18 of the Impugned Order for imposing penalty of Rs. 1.2 Crore on the individual Appellant for the contravention of Section 10(6) of FEMA read with Regulation 6 (1) of Foreign Exchange Management (Realization, Repatriation and Surrender of Foreign Exchange) Regulation 2000: "I find that in the instant case, though the prepaid forex cards were issued in the names of 255 passengers portraying that the said persons have declared before the Authorised Dealer for release of foreign exchange towards prepaid forex cards, in fact no passenger had utilised the said prepaid forex cards and since the forex has been released by the Noticee 1 by not identifying the passengers, and the said forex was neither used for the declared purpose, nor submitted to....
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....mit Bhatia. 20. With respect to the penalty imposed for the contravention of Section 10(6) of FEMA read with Regulation 6 (1) of Foreign Exchange Management (Realization, Repatriation and Surrender of Foreign Exchange) Regulation 2000, we find that the Ld. AA has held him as the de-facto declarant for having failed to specify the actual passengers, who were issued the Forex Travel Pre-Paid Cards. It appears to us that Shri Amit Bhatia, who was responsible for the affairs of the Appellant Company in South India from 15.02.2016 had joined the investigation after the contraventions had occurred in 2014-15. He seems to have appeared before the Respondent Directorate as representative of the Appellant Company. In his voluntary statement tendered on 27.11.2018 he stated the factual position. On perusal of paragraph 17 of the Complaint filed under Section 16(3) of FEMA, we find the following: "In the absence of complete details/documents revealing the identity and genuineness of the actual declarant or the person with whom he dealt with, it appeared that Shri Amit Bhatia of M/s TCIL has acted as defacto declarant for the purpose of forex mentioned in the declaration under sub-....