TaxTMI 
TaxTMI 
2026 (5) TMI 1102
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....hree appeals have been preferred to challenge the orders dated 26.02.2021 passed by the Adjudicating Authority imposing a penalty of Rs. 196 Crores on M/s Integrated Health and Healthcare Services India Private Limited ("IHHS India') and Rs. 93 Crores on Radiant Life Care Private Limited ('RLCPL') and lastly Rs. 9.30 Crores on appellant, Shri Abhay Soi. The penalty has been imposed on others also but they are not part of these appeals. Two separate orders have been passed by the Adjudicating Authority. However, it is based on interlinking facts, thus I am passing a common order for disposal of all the three appeals. Brief facts of the case: 2. The appeal has been preferred by RLCPL which was earlier known as IHHS India, a Company incorporated under the Indian Companies Act 1956. IHHS India was wholly owned subsidiary of Integrated Health and Healthcare Services Private Limited, Mauritius ('IHHS Mauritius'). During the years 2000-2001 to 2010-2011, IHHS India received Foreign Direct Investment (FDI) of Rs. 199.07 Crores from IHHS Mauritius against equity as well as preferential capital. IHHS India was later on taken over by Infrahealth Pvt. Limited, Singapore from IHHS Mauriti....
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.... and security deposit of Rs. 15 Crores from the FDI received by IHHS India since 11.12.2000 till 09.07.2010. During the year 2010-2011 to 2013-2014, RLCPL (earlier known as IHHS India) received Rs. 92.85 Crores as FDI from M/s Infrahealth Pvt. Limited Singapore. The FDI received was utilized to advance loan to LHS as per the Management Agreement. 6. The fact given above reveals receipt of FDI from the company established outside India towards equity and preferential capital of Indian subsidiary company. The allegation against the appellant is for violation of Section 6(3)(b) of the Foreign Exchange Management Act, 1999 (in short "the Act of 1999") read with Regulation 4 and 6 of Foreign Exchange Management (Borrowing and Lending in Rupees) Regulation, 2000 (in short "Lending in Rupees Regulation 2000"). The Show Cause Notice was issued even alleging the contravention of Regulation 3 of Foreign Exchange Management (Borrowing and Lending in Foreign Exchange), Regulation 2000 (in short "Lending in Foreign Exchange, Regulation, 2000"), however it has been dropped by the Adjudicating authority vide the impugned order holding that the regulation pertains to a transaction between two I....
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....13 & Delay of 10 M & 22 days in reporting of 12 73692000 24.4.07 15.5.08 13 79545480 7.8.07 17.9.07 14 39307860 12.11.07 7.12.07 (iv) 214100340 691204 13.11.7 23.04.09 15 39700000 26.2.08 12.3.08 Delay of 1 year 3 months reporting of FCGPR 16 40400000 10.3.08 24.03.08 17 40610000 2.5.08 26.05.08 18. 39410000 21.12.07 3.1.08 (v) 160120000 516516 7.5.08 13.8.08 19 42790000 11.6.08 17.6.08 Delay of 13 days in reporting of remittance of sr. 24 & Delay of 9 month & 12 days in reporting of FCGPR 20. 42440000 2.6.08 17.6.08 21 42770000 4.6.08 17.6.08 22 42139999 23.7.08 13.8.08 23 42567390 13.8.08 28.8.08 24 44235576 4.9.08 17.10.08 (vi) 256932966 ....
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....598 27.8.10 21.1.11 (xiii) 202341107 652713 7.11.11 27.1.11 46 45158645 21.12.10 21.1.11 Delay of 1 year & 11 days in reporting of remittance of Sr, 48 47 50004636 27.1.11 17.2.11 48 45048649 1.3.11 18.3.11 (xiv) 140211930 452297 7.6.11 22.6.11 49 22385000 16.6.11 19.9.11 72209 7.6.11 22.8.11 Delay of 2 M & 4 days in reporting of remittance & also delay of 3 days in reporting of FCGPR (xv) 22385000 50 51648451 8.12.11 These remittances were not reported to RBI. Also delay of 23 days in reporting of FCGPR 51 57913421 9.1.12 (xvi) 109561872 353426 23.1.12 15.3.12 52 24941837 18.6.12 19.7.12 80457 25.9.12 8.11.12 Delay of 13 days in reporting of FCGPR (xvii) 24941837 &nb....
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....here was no element of borrowing of funds so as to apply Regulation 4 and 6 of "Lending in Rupees Regulation 2000". 11. The Ld. Counsel for the appellant, further, submitted that IHHS Mauritius was incorporated for promoting healthcare and setting up operating chain of super specialist hospitals in India. The appellant company was eligible to receive 100% FDI under "TISPRO Regulation 2000". It was with further statement that FDI received by the appellant company was with full compliance of the provisions of "FEMA 1999" and the Regulations. The legitimacy for the receipt of the FDI by the appellant company is evident from the fact that RBI never raised any objection in pursuance to the reports submitted by the appellant company, rather, RBI condoned the delay in reporting vide its order dated 08.10.2020 despite pending proceedings initiated by the Enforcement Directorate(ED). In view of the above, there was no contravention of any of the provisions of law in receipt of the FDI towards equity shares/ preferential capital. The Show Cause Notice was not even containing allegation for receipt of FDI in violation of the Act of 1999 and Regulations of 2000. 12. Ld. Counsel for the a....
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....anagement agreement where it was required to provide financial assistance and re-arrangement and management operation of the hospital. The reference of other agreements with the private hospitals which include Dr. Balabhai Nanavati Hospital Mumbai entered in the year 2014 and 76% equity of Prima Med Hospital, Gurgaon was given. It was even for the management of Jaslok Hospital and Research, Mumbai. 16. Ld. Counsel for the appellants, further, submitted that the respondent has made much emphasis on 'downstream investment' ignoring the fact that it was added vide Notification dated 07.06.2013 otherwise Regulation 14 was not existing prior to it, rather, initially "TISPRO Regulation 2000" were containing only 9 Regulations and it was by way of amendment from time to time that regulations upto 13 were added prior to Notification dated 07.06.2013. Regulation 14 defining 'downstream investment' was added for the first time on 07.06.2013 while the period involved in these cases is from the year 2000 onwards. In fact, it is not a case of indirect FDI by one Indian company to another because LHS is not a company but is a Society registered under the Societies Registration Act, 1860 and t....
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....ime and for that Regulation 14 was not existing till it was brought by way of amendment in the year 2013. 20. Ld. Counsel for the appellants further submitted that the impugned order is having self-contradiction, in making application of "TISPRO Regulation of 2000" and "Lending in Rupees Regulation 2000" in contrast. Both the regulations cannot operate simultaneously, rather, application of both the Regulations shows conflict in the order. The respondent was not clear about the application of the Regulations and therefore initially made a reference of Regulation 4 and 6 of the "Lending in Rupees Regulations 2000" but impugned order was thereupon passed in reference to Regulation 5 and 14 of "TISPRO Regulation of 2000" which cannot run simultaneously for one and same transaction because both the regulations are mutually distractive. The elaborate arguments were made even touching other aspects which would be elaborately referred while recording findings to avoid bulkiness of the order. Arguments of the Counsel for the respondent: 21. Ld. Counsel for the respondent contested the appeals and made elaborate arguments with a prayer to endorse the impugned order passed in conson....
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....t Director, Directorate of Enforcement. It was alleged that IHHS has received remittance of Rs. 291.93 Crores from its Mauritius based parent company, IHHS Mauritius while both the companies were only paper companies. It was with the further allegation that LHS is charitable trust which runs hospitals in the name of Dr. BLK Memorial Hospital, New Delhi and Dr. BKL Memorial Hospital, Ludhiana. It was with the statement that in the year 2000, IHHS Private Limited acquired BLK Hospital, New Delhi through management agreement dated 30.11.2000. It was agreed to provide requisite finance for reconstruction of the hospital and for that even to provide corporate guarantee for obtaining loan from the financial institutions. IHHS was to provide all technical know-how and management consultancy to the hospital. IHHS India received FDI of Rs. 291.93 crores from its parent company, IHHS Mauritius. It was through the money-laundering process and ultimately used to extend loan to the charitable trust in contravention to the provisions of the "Act of 1999" and "Lending in Rupees Regulation 2000". The details of the FDI received by the appellants from time to time was also given with the details of....
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....sed in reference to aforesaid provisions. 27. To consider the issues involved in this case, it would be gainful to quote Section 6(3)(b) of the "Act of 1999" apart from Regulations 4 and 6 of "Lending in Rupees Regulation 2000" and are quoted thus:- Section 6(3)(b) of the "Act of 1999" 6. Capital account transactions - . .. .. .. .. .. .. .. .. .. .. (3) Without prejudice to the generality of the provisions of sub-section(2), the Reserve Bank may, by regulations, prohibit, restrict or regulate the following - .. .. .. .. .. .. .. .. .. .. .. (b) Transfer or issue of any security by a person resident outside India; .. .. .. .. .. .. .. .. .. .. .. Regulation 4 of the "Lending in Rupees Regulation 2000" Borrowing in rupees by persons other than companies in India. 4. A person resident in India, not being a company incorporated in India, may borrow in rupees on nonrepatriation basis from a non-resident Indian or a person of Indian origin resident outside India, subject to the following conditions : (i) the amount of loan shall be received by way of inward remittance from outside India....
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....Regulation of 2000" 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 an entity incorporated outside India) (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. (ii) Notwithstanding anything contained in sub-regulation (i) above, a person who is a citizen of Bangladesh or an entity incorporated in Bangladesh may, with the prior approval of Foreign Investment Promotion Board of the Government of India, purchase shares and convertible debentures of an Indian company under Foreign Direct Investment Scheme, subject to the terms and conditions specified in Schedule 1. (iii) Further, notwithstanding anything contained in clause (i) of the sub-regulation (1) above, a person who is a citizen of Pakistan or an entity incorporated in Pakistan may, with the prior approval of the Foreign Investment Promotion Board of the Government of India, purchase shares and convertible debentur....
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....y the Reserve Bank from time to time.] (7) A Non-Resident Indian (NRI) may invest in exchange traded derivative contracts approved by SEBI from time to time out of INR funds held in India on non-repatriable basis subject to the limits prescribed by SEBI. Such investments will not be eligible for repatriation benefits. (7A) A QFI may purchase equity shares of an Indian company subject to the terms and conditions specified in Schedule 8.] [Explanation: For the purposes of sub-regulations (1) to (7) above, no class of investor referred to in those sub-regulations shall made investment, directly or indirectly, in any security, issued by an Indian company which is engaged or proposes to engage in any of the activities in which foreign investment is prohibited under sub-regulation (b) of regulation 4 of the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000, as amended from time to time.] (8) A registered Foreign Institutional Investor (FH) including SEBI approved sub-accounts of the FHs, registered with SEBI or a Non-Resident Indian (NRI) may purchase, hold or sell Indian Depository Receipts (IDRs) of eligible com....
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....rson resident outside India' [ as defined at section 2(v) of FEMA, 1999], excluding an individual; (ix) "Resident Indian citizen" shall be interpreted in line with the definition of person resident in India as per FEMA, 1999, read in conjunction with the Indian Citizenship Act, 1955. (x) "Total foreign investment" in an Indian Company would be the sum total of direct and indirect foreign investment. 2. Investment in Indian companies can be made by both non-resident as well as resident Indian entities. Any non-resident investment in an Indian company is direct foreign investment. Investment by resident Indian entities could again comprise both resident and non-resident investments. Thus, such an Indian company would have indirect foreign investment if the Indian investing company has foreign investment in it. The indirect investment can also be through multi-layered structure." 29. Para 3.3.3 of Circular dated 31.03.2010 taken effect from 01.04.2010 to restrict FDI in Trusts is also quoted hereunder: 3.3.3 FDI in Trusts: FDI in Trusts other than VCF is not permitted 30. The reference of the relevant provisions has been given and are quoted f....
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.... schedule I of FEM (Transfer or issue of Security by a Person Resident Outside India) Regulations, 2000 r/v section 42 of FEMA 1999. 2. WHEREAS M/s Integrated Health and Healthcare Services India Pvt. Ltd. (Now known as Rediant Life Care Private Limited), Sh. Prakash Lal Kapur, (Director), Sh. Arun Kapoor. (Director), Sanajy Sood, (Director) i.e persons resident in India had received FDI of Rs. 291.93 crore as detailed at table no. 4, page 18-21 of the complaint dated 27.03.2019 and hence they are liable to follow the provisions of FEMA, 1999 and the regulations issued there-under. The case against M/s Integrated Health and Healthcare Services India Pvt. Ltd. (Now known as Radiant Life Care Private Limited) was taken up for investigation under the provisions of FEMA, 1999 on the basis of an information received from the Income Tax Department through H.0. letter F.No. T-1/HQ/06/2013-E.O.(VPV) dated 24.01.2013 that integrated Health and Healthcare Services India Pvt. Ltd., (IHHS) had received remittances as FDI from its Mauritius based parent company Integrated Health and Healthcare Services, (1HHS) which was Used for the purposes other than for which it was brought as detai....
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.... company. • that between the year 2007 and 2010, he was the one of directors of M/s Integrated Health and Health Care Services India Pvt. Lid and later in September. 2010 he was resigned from company. The other directors were Sh. Sanjay Sood and Dr. Sobti. He was not shareholder of the company. On being asked about receiving of FDI amount of Rs. 200 Crore approx. he stated that the FDI was received during his tenure in company and he had signed some documents submitted to the Bank of Baroda through which the FDI was received. Statements of various other persons connected with the above case namely Shri Dhruv Chodhrie, Ms. Prachi Singh, Shri Rajesh Thacker & Shri Abhay Soi were also recorded during the course of investigation as detailed in the complaint dated 26.03.2019. 6. AND WHEREAS during the course of investigation it was revealed that Lahore Hospital Society/ B.L. Kapoor memorial Hospital (BLK) received loan of rupees 180,07,00,000 and security deposit of Rupees Fifteen Crores from the FDI received by IHHS, India during the period 11.12.2000 till 09.07.2010 in the following manner: Amount (Rs.) * i) Temporary L....
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....ge or that he exercised due diligence to prevent such contravention. (2) Notwithstanding anything contained in sub-section (I), where a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder has been Committed by a company and it is proved that the contravention has taken place with the Consent or connivance of. or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company. such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. Explanation: - For the purposes of this section i. "Company" means anybody corporate and includes a firm or other association of individuals; and ii. ."Director", in relation to a firm. means a partner in the firm. Regulation 4 of The Foreign Exchange Management (Borrowing and Lending in Rupees) Regulations, 2000 provides as under:- Borrowing in rupees by persons other than companies in India A person resident in India, not being a company incorporated in India, may borrow in rup....
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....fication No. 20/2000 dated 03.05.2000 i.e. FEM (Transfer or issue of Security by a Person Resident Outside India) Regulations, 2000 in a manner as detailed below:- (1) Funds received as FDI by Indian company was not used for the purpose it was received and instead an amount of Rs. 195.07,00,000/- was given as loan to Lahore Hospital Society which was involved in maintaining hospital in India. Pertinently funds received as FDL can only be used for downstream investment and advancing loan is not downstream investment in any case and therefore, M/s Integrated Health and Healthcare Services India Pvt. Lid. has after allotment of shares to their overseas investor advanced loan of Rs. 193,07.00,000/- to Lahore Hospital Society/B L Kapoor Hospital in contravention of Section 6(3)(b) of FEMA 1999 read with Section 13(1) and Section 42 of FEMA, 1999 alongwith Regulation 4 and 6 of Foreign Exchange Management (Borrowing and Lending in Rupees) Regulation. 2000 und Regulation 3 of Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulation, 2000. (I) Delay in reporting of remittances and delay in allotment of shares, as reported by the RBI has been appa....
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.... 2000 whereby in case it is decided to hold adjudication proceedings as aforementioned, they would be required to appear either in person or through Legal Representative / Chartered Accountant duly authorized by then to explain and produce such documents or evidence, as may be useful for or relevant to the subject matter of enquiry and in case the Noticees fail, neglect or refuse to appear before the undersigned n the appointed date and time, the adjudication proceedings shall proceed against then ex- parte. Personal hearing during Adjudication Proceedings could be waived at the request of the Noticees So that the case may be decided without requiring their personal attendance or the attendance of their legal representative/ chartered accountant. 16. THIS SHOW CAUSE NOTICE is issued without prejudice to any other action that may be taken against the Noticees mentioned herein above or any other person/ firm connected with this case under the provisions of FEMA, 1999, Regulations issued there-under or any other law for the time being in force. This Directorate also reserves the right to issue a corrigendum or an addendum to this Memorandum on the basis of fresh evid....
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....purpose of acquiring this company was to enter into the healthcare sector via a vehicle which had developed BLK Hospital and had a long term operational Management contract with BLK Hospital. • He was approached in the year 2009 by Mr. Dhruv Choudhrie who is the trustee of Lahore Hospital Society (LHS) as BLK hospital was in state of distress due to cost and time over run in the project, delays in payments to banks, lack of adequate processes and protocols in operations, inadequate organization structure, poor management. • It was decided to acquire IHHS India based on the operational management arrangement it had with Lahore Hospital Society in relation to BLK Hospital and for the future potential of profit. • As per the management and operations arrangement IHHS India was to fund the entire development of the hospital as well as all liabilities and loses. Billing was to be done by the hospital. • IHHS India had raised FDI from its parent IHHS Mauritius to the tune of approx. Rs 200 cr. between the year 2000 and July 2010. Of this amount Rs 15 crores was given to LHS as security deposit and approx. Rs. 180 crores as unsecured loa....
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....Table No. 4 at Page 21 of the complaint dated 21.06.2019. 5. AND WHEREAS information regarding receipt of FDI was received from RBI vide their letter dated 16.11.2017) which is mentioned at table no. 1, page 4-7 of the complaint dated 21.06.2019. 6. AND WHEREAS the relevant sections and regulations of FEMA 1999 connected with this case are mentioned as under; Santion-6 (3) (b) of FEMA, 1999 provides as under. (3) Without prejudice to the generality of the provisions of sub-section (2), the Reserve Bank may, by regulations prohibit, restrict or regulate the following,- ...... b) Transfer or issue of any security by a person resident outside India; ...... Section 13(1) FEMA, 1999 provides that: "If any person contravenes any provision of this Act, or 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, upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where such amount is quantifiable, or up to tw....
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....sident External (NRE)Non-resident Ordinary (NRO/ Foreign Currency Non-resident (FCNR)Non resident Non-repatriable (NRNR)/Non-resident Special Rupee (NRSR) account of the fender maintained with an authorised dealer or an authorised bank in India: (ii) the period of loan shall not exceed three years; (iii) j the rate of interest on the loan shall not exceed two percentage points over the Bank rate prevailing on the date of availment of loan: (iv) where the loan is made out of funds held in Non-resident Special Rupee (NRSR) account of the lender, payment of interest and repayment of loan shall be made by credit to that account: and in other cases. payment of interest and repayment of loan shall be made by credit to the lender's Non-resident Ordinary (NRO) or Non- resident Special Rupee (NRSR) account as desired by the lender; and (v) the amount borrowed shall not be allowed to be repatriated outside India. Regulation 6 of The Foreign Exchange Management (Borrowing and Lending in Rupees) Regulations, 2000 provides as under: - Restriction on use of borrowed funds No person resident in India who has borrowed in rupees fro....
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.... Exchange Management (Borrowing and Lending in Foreign Exchange) Regulation, 2000. (II) Shri Abhay Soi, Managing Director of M/s Radiant Life Care Private Limited may be charged under Section 42(1) of FEMA 1999 as he has taken all management decisions for and on behalf of the company M/s Radiant Life Care Pvt. Ltd. 8 NOW THEREFORE M/s Radiant Life Care Private Limited earlier known as M/s Integrated Health and Healthcare Services India Pvt. Ltd (Noticee no.1) and Sh. Abhay Soi Managing Director of M/s Radiant Life Care Private Limited are required to show cause in writing within 30 days from the date of receipt of this Notice, as to why adjudication proceedings as contemplated under section 13 of FEMA should not be held against then in the manner as provided under Rule (4) of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000. for the abovementioned contraventions of the provisions of FEMA. 1999 and why penalty as contemplated under section 13(1) of FEMA 1999 should not be imposed upon them. 9. IN ISSUING this Show Cause Notice, reliance is placed, inter alia. on the documents mentioned in Annexure to the Complaint dated 21.....
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.... law not referred. I would analyze the Show Cause Notice to find out whether material was disclosed to show contravention of Regulation 5 and 14 of "TISPRO Regulation 2000". The theme of the Show Cause Notice and the impugned order is for utilization of FDI by the appellant company in contravention of the "Lending in Rupees Regulation 2000". It was initially from the parent company i.e. IHHS Mauritius and thereafter from Infrahealth Private Limited, Singapore. The allegation was made for contravention of provisions of the "Act of 1999" and "Lending in Rupees Regulations, 2000" for use of the FDI by the appellant to advance loan to LHS, though not permissible and in one case, allegation for contravention of para 9(1)(a) and 9(1)(b) of Schedule-1 of the TISPRO Regulation, 2000 has also been made. It is on account of delay in reporting of receipt of FDI and in issuance of the equity as a consequence thereof. The RBI had compounded the delay and accordingly charge in reference to it was dropped by the Adjudicating Authority. 35. The Show Cause Notice makes a reference of the status of the appellant company and even FDI received by it from time to time. It is coupled with facts that ....
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.... to impose penalty for contravention of Regulation 5 and 14 of "TISPRO Regulation 2000". It was no doubt that the Adjudicating Authority has discussed the case in reference to Regulation 5 and 14 of the "TISPRO Regulation, 2000" and even referred in the operative part of the order but does not impose penalty under those provisions. It would be born out from the operative part of the impugned order, which is quoted separately for both the appeals. 37. The operative parts of the order in the case of IHHS India are quoted hereunder: 10.1 Penalty of Rs. 196 Crores (Rupees One Hundred and Ninty-six Crores) is imposed under Section 13(1) of FEMA 1999 upon noticee no. 1 i.e M/s Integrated Health and Healthcare Services India Pvt. Ltd. (now known as Radiant Life Care Pvt. Ltd.) for contravention of provisions of Section 6(3)(b) of FEMA 1999 read with Regulation 4 and 6 of Foreign Exchange Management (Borrowing and Lending in Rupees) Regulations 2000 and FDI Policy issued under Foreign Exchange Management (Transfer or Issue of Security by a person resident outside India) Regulations 2000 by RBI under the provisions of Section 6(3)(b) of FEMA 1999. 10.2 Penalty of Rs. 19....
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....esident outside India) Regulations, 2000 are already conclusively proved and hence there is no bar for taking cognizance of the same though the relevant Section and Regulation are not clearly mentioned.... ....... 11.1 Penalty of Rs. 93 crores (Rupees Ninety-three Crores) is imposed under Section 13(1) of FEMA 1999 upon noticee no. 1 i.e M/s Radiant Life Care Pvt. Ltd. (earlier known as Integrated Health and Healthcare Services India Pvt. Ltd.) for contravention of FDI Policy issued under Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations 2000 by RBI under the provisions of Section 6(3)(b) of FEMA 1999 read with Regulation 4 and 6 of Foreign Exchange Management (Borrowing and Lending in Rupees) Regulations 2000. 11.2 Penalty of Rs. 9.30 crores (Rupees Ninety Crores Thirty Lakhs) is imposed under Section 13(1) of FEMA 1999 upon noticee no. 2 Sh. Abhay Soi, Managing Director of the company M/s Radiant Life Care Pvt. Ltd. (earlier known as Integrated Health and Healthcare Services India Pvt. Ltd.) for contravention of FDI Policy issued under Foreign Exchange Management (Transfer or Issue of Security by ....
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....ars. Even as per the Show Cause Notice and the facts available on record, it does not show it to be a case of borrowing of funds by the appellant. The Regulations on borrowings were not attracted on the facts of the case, yet not only it was applied to make out a case adverse to the appellant but for imposition of the penalty in reference to those provisions which were not even applicable to the facts of the case. It seems to have realized by the Adjudicating Authority and therefore reference of Regulation 5 and 14 of the "TISPRO Regulation 2000" was given subsequently. 42. In the light of the facts given above, I may now analyse the Regulations 5 and 14 of "TISPRO Regulation 2000" for its application. It is not in dispute that the Show Cause Notice to the appellants was not having reference of the provisions aforesaid. However, finding material alleged to be available in reference to those provisions, the Adjudication Authority has dealt with the case for holding contravention of Regulations 5 and 14 of the "TISPRO Regulation, 2000". However, the impugned order does not impose penalty in reference to contravention of Regulations 5 and 14 of the "TISPRO Regulation, 2000". Howeve....
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....13. 45. I need to further analyze the case in reference to the definition of 'downstream investment' which means indirect foreign investment by one Indian company into another Indian company by way of subscription or acquisition. The respondent could not show investment by one Indian company to another, rather, it goes against their own allegation for investment of the FDI by way of loan in a trust, though not permissible. At this stage, I may clarify that LHS is not a trust registered under the Indian Trust Act, 1882, rather, as per the statement of fact given by the Adjudicating Authority, it is a society registered under the Societies Registration Act, 1860. Further, a perusal of the record available with me would reveal a document pertaining to the registration of LHS as a society under Societies Registration Act, 1860 issued in 1949. The Registration Certificate is quoted hereunder: 46. At this stage, I need to even refer to the definition of "Indirect Foreign Investment" because downstream investment applies only in the case of indirect foreign investment accordingly definitions of 'downstream investment' and 'Indirect foreign investment' given under Regulation 14 of "T....
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....n Rupees Regulation, 2000 which cannot be under Section 6(3)(b) because provision aforesaid gives power to the RBI for issuance of regulations for transfer or issue of any security by a person resident outside India while Regulation referred above are for borrowings 50. I may now refer to even Section 6(3)(e) of the "Act of 1999", though, Show Cause Notice was not given in the reference of the said provision but has been dealt by the Adjudicating Authority and thus needs to be clarified. Section 6(3)(e) of the "Act of 1999" refers to the borrowing or lending in rupees in whatever form or by whatever name called between a person resident in India and a person resident outside India. The case in hand is not of borrowing or lending of rupees in any form, rather, in specific term investment in security which is provided separately under the "TISPRO Regulation, 2000". The provision for borrowing or lending are separately given under "Lending in Rupees Regulation, 2000" and "Lending in Foreign Exchange, 2000" and it cannot be intermixed with the separate provision for purchase of security given under "TISPRO Regulation, 2000". Section 6(3)(e) of the "Act of 1999" has no application to....