TaxTMI 
TaxTMI 
2026 (7) TMI 1950
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....xem.) MP-FE-216/MUM/2018 (Misc.) MP-FE-217/MUM/2018 (Stay) MP-FE-218/MUM/2018 (Exem.) FPA-FE-55/MUM/2018, MP-FE-510/MUM/2024 (Review) MP-FE-224/MUM/2018 (Misc.) MP-FE-225/MUM/2018(Exem.) FPA-FE-56/MUM/2018, MP-FE-511/MUM/2024 (Review) MP-FE-244/MUM/2018 (Stay) FPA-FE-57/MUM/2018, MP-FE-512/MUM/2024 (Review) MP-FE-251/MUM/2023 (Review) MP-FE-251/MUM/2018 (Stay) FPA-FE-61/MUM/2018, MP-FE-513/MUM/2024 (Review) MP-FE-193/MUM/2018 (Stay) MP-FE-257/MUM/2018 (Stay) FPA-FE-48/MUM/2018, MP-FE-514/MUM/2024 (Review) MP-FE-194/MUM/2018 (Stay) MP-FE-195/MUM/2018 (Exem.) MP-FE-258/MUM/2018 (Stay) FPA-FE-49/MUM/2018 JUSTICE MUNISHWAR NATH BHANDARI (CHAIRMAN) AND SHRI RAJESH MALHOTRA (MEMBER) For the Appellant : Mr. Swadeep S. Hora, Mr. Sahajveer Singh, Mr. Vaishnav Kumar, Mr. Amol Chitale, Mr. Sarthak Sharma, Mr. Nishit Agrawal, Ms. Kanishka Mittal, Mr. Karan Lahiri, Mr. Vikas Kr. Jha, Ms. Sakshi Malhotra, Mr. Aakash Aggarwal, Mr. Sanjay Jain, Mr. L.S. Shetty, Ms. Momata Bhattachrji, Ms. Harshita Sukhiya, Mr. Anukalp Jain, Advs. For the Respondent : Mohd. Wasay Khan, Adv. FINAL ORDER The batch of appeals have been filed to challenge the order dated 31.05.2018 passed by the Special ....
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....on the following facts: 3. The respondent received a reliable information about contravention of the Act of 1999 and accordingly enquiries were initiated against foreign remittance in organizing of Indian Premier League (hereinafter referred to as "IPL") in South Africa by the Board of Control for Cricket in India (in short "BCCI"). The directions were issued to the BCCI for forwarding the relevant documents/details relating to the aforesaid. The BCCI vide its letters dated 04.07.2008, 07.08.2008 and 30.10.2009 furnished the required details and documents. The respondent called for further information and documents from the BCCI. On the scrutiny of various details and documents received from BCCI and other sources, following facts were revealed: "2.2 That in the Working Committee Meeting of the BCCI held on 13.09.2007, it was decided to launch the Indian Premier League (IPL), to be formed as a sub-committee of BCCI: that a Governing Council would be set up to deal with all matters related to the IPL: that Shri Lalit Kumar Modi, the then Vice President of BCCI was appointed as the Chairman of IPL: that in the Annual General Meeting of BCCI held on 28.09.2007, it was reso....
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....ove. 2.4 That the BCCI finally decided to shift the Tournament to South Africa; that the BCCI remitted huge amounts of foreign exchange from its accounts held in the State Bank of Travancore, Jaipur Branch, to the account of Cricket South Africa (CSA), without obtaining the required permission from the Reserve Bank of India. The preliminary enquiries in the matter also indicated that the BCCI did not open or operate any separate bank account independently in its name in South Africa, but got opened and operated a separate bank account in South Africa through CSA, in which the amounts transferred by BCCI to the account of CSA were finally credited: that the said account was a dedicated bank account opened for the sole purpose of meeting the expenditure incurred for the conduct of IPL-2 in South Africa: that for the conduct of IPL-2 in South Africa, BCCI-IPL had entered into Heads of Agreement dated 30.03.2009 with CSA; that as per the terms of the said Agreement, CSA was to open a dedicated bank account in the name of IPL-SA and that the remittances made by BCCI to the account of CSA would be transferred to this dedicated account to meet the expenditure to be incurred by CS....
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....nt with Cricket South Africa (CSA) on 30.03.2009 for hosting and staging of the IPL-2 Tournament in South Africa: that the said Agreement was signed by Shri N. Srinivasan, the then Honarary Secretary, on behalf of BCCI: that as per the said Agreement, the CSA was required to open and operate a dedicated bank account in the name of "IPL South Africa"; that the funds would be deposited by BCCI into the Bank account of CSA from time to time and that CSA would transfer these funds into the bank account of IPL South Africa towards the anticipated and certain other IPL-related expenses; that the ticket revenue earned through BCCI-IPL was also to be deposited into this account; that no sums would be released from the said bank account, without the explicit written authorization by BCCI-IPL: that CSA was required to produce and maintain full and accurate accounting records of all the sums and other expenditure paid out for the Budgeted costs; that for the services and assistance to be rendered by CSA, the BCCI-IPL agreed to pay to CSA a fixed fee of US $ 30,00,000/ as service charges within 15 days of the last Match in 2009: that a further amount of US $ 25,00,000 was agreed to be paid wit....
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....d in relation to the IPL. It was also stipulated that the revenue of any kind from any source in whatsoever nature in relation to the staging of IPL matches should accrue to and for the benefit of BCCI-IPL and its licensees and CSA would not have any rights in respect thereof. It was also stipulated under the Agreement that the CSA would open and operate a dedicated bank account in the name of IPL South Africa and monies would be deposited to the CSA bank account from time to time and CSA would transfer these funds into the bank account of IPL South Africa towards anticipated and certain other IPL related expenses; that the ticket revenue earned through BCCI-IPL ticketing partners would also be deposited in the said account. It was further provided that no sums could be released from the said bank account without the explicit written authorization by BCCI-IPL: that no sums would be made by CSA from this account otherwise than strictly in accordance with the above conditions, implying thereby that no sums would be debited from this dedicated bank account without explicit instructions/approval from BCCI-IPL. 2.9 That the Agreement further provided that "as consideration for ....
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....ture and manner of the transactions entered into between the BCCI and CSA pursuant to the Agreement dated 30.3.2009, further details and documents were sought from the BCCI by, ED, Mumbai vide letter dated 26.04.2010. The BCCI vide its letter dated (i) 09.05.2010, (ii) 29.07.2010, (iii) 16.08.2010, (iv) 21.01.2011 (v) 03.02.2011 (vi) 25.06.2011, furnished various details and documents in respect of the conduct of IPL-2 Tournament in South Africa. Similarly, further details and documents were sought from the State Bank of Travancore, Jaipur Branch with regard to the remittances made by BCCI to CSA from their A/cs maintained with the branch and the same were provided by the Bank, vide its letter dated 06.09.2010". 4. The facts given above pertains to the IPL Tournament conducted in South Africa in the year 2009 on account of security reasons due to General Election in the country. It was pursuant to a decision taken by the Working Committee for shifting the venue of tournament out of India. The final decision in the matter was left on Shri Shashank Manohar, the then President of BCCI. After a decision to shift the tournament to South Africa, the issue of transmission of the remitt....
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....,000 8. T-4/16-B/SDE/R/2011 (SCN XI)) 1) BCCI 2) Shri Lalit Kumar Modi 3) Shri N. Srinivasan 4) Shri M.P. Pandove 1) 1,00,00,000 2) - 3) 10,00,000 4) 10,00,000 9. T-4/16-B/SDE/R/2011 (SCN XII) 1) State Bank of Travancore 2) Shri A.K. Nazeer Khan 1) 7,00,00,000 2) 10,00,000 5. The penalties were imposed finding contravention of the provisions of the Act of 1999 and the Regulations made thereunder. It was for remittance of foreign exchange outside India without the approval of the RBI and accordingly assigning role to each of the appellants, the respondent determined contravention of the provisions of the Act of 1999. The main charge was in regard to the transfer of foreign exchange of US$ 4,98,62,799.42 equivalent to Rs. 243,45,30,781, to a person resident outside India without prior approval of the RBI. The officials of the BCCI were also charged under Section 42(1) and (2) of the Act of 1999. The respondent found that remittance referred to above was made by BCCI to CSA in terms of the conditions stipulated under "Head of Agreement" dated 30.03.2009, executed between BCCI and CSA where BCCI was obligated to make remittance to CSA ....
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....eign exchange transactions. No objection was ever raised by RBI in respect of any of the transactions. Any subsequent deviation, if at all, in utilization of funds cannot be attributed to SBI in view of Section 10(6) of FEMA. 9. The counsel for the Appellant further stated that remittances were reported to the Reserve Bank of India through statutory R-Returns within prescribed timelines. No objection or deficiency was ever communicated by RBI. 10. The counsel for the Appellant further stated that the Forms A-2 dated 31.03.2009 for USD 1,000,000 and USD 7,000,000 were complete in all respects and supported by the Service Agreement dated 30.03.2009 executed between the Board of Control for Cricket in India ("BCCI") and Cricket South Africa ("CSA"). There was no discrepancy, alteration, or deficiency in the documentation. 11. The counsel for the Appellant submitted that the Service Agreement dated 30.03.2009 executed between BCCI and Cricket South Africa provided for payment of service fees in US Dollars. It was for the IPL tournament to end on 24.05.2009 The remittances on 10.08.2009 and 27.08.2010 (though bearing a printed date of 26.08.2010) were processed only after the o....
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....er thereof. It is settled law that a society registered under the Societies Registrations Act is not a corporate body. The counsel also submitted that the Penal provisions must be strictly construed. In absence of clear statutory inclusion, Section 42 could not have been extended by analogy. 16. The counsel for the Appellant further submitted that the Bombay High Court in Shashank Manohar v. Union of India and Anr. (Writ Petition No. 5305 of 2013) held BCCI to be a "person" under Section 2(u) of FEMA. However, being a "person" does not automatically render to be a "company" for the purpose of Section 42. The counsel for the Appellant stated that there is no finding that the Appellant personally authorised or directed the alleged contravention with requisite mens rea. 17. The counsel for the Appellant also submitted that the impugned order fails to establish that the Appellant was in charge of and responsible for the conduct of business in relation to the alleged FEMA violation in the manner contemplated under Section 42. Submissions of appellant BCCI Transactions between BCCI and CSA are Current Account Transactions. 18. The learned counsel for the BCCI submitted tha....
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....nd quality of cricket in India. Therefore, expenditure incurred for organizing the tournament and revenue generated therefrom are revenue/current account transactions. 22. It is submitted that Show Cause Notice No. 1 issued by the Directorate of Enforcement contained no allegation whatsoever that the transactions undertaken by BCCI constituted "capital account transactions". It was only in the Order-in-Original dated 31.05.2018 that the Adjudicating Authority, for the first time, characterized the transactions as "capital account transactions". Such a finding travels beyond the scope of the Show Cause Notice and has caused grave prejudice to BCCI by denying an effective opportunity to respond and explain the true nature of the transactions. This course of action is impermissible in law and contrary to settled principles laid down by the Hon'ble Supreme Court in Tarlochan Dev Sharma v. State of Punjab and Godrej Industries Ltd. v. CCE reported in (2008) 17 SCC 471. It has been held that grounds not stated in the show cause notice cannot subsequently form the basis of an adverse order. NO CONTINGENT LIABILITY WAS INCURRED 23. The Adjudicating Authority erroneously held t....
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....me cannot constitute a real or reasonable opportunity of hearing. 27. The alleged contraventions were not properly explained to BCCI as required under Rule 4(4) of the Foreign Exchange Management (Adjudication, Proceedings and Appeal) Rules, 2000. 28. BCCI was also denied an opportunity to produce documents and file evidence as contemplated under Rule 4(5) of the Rules. Its application seeking supply of documents and materials referred to in the Complaint was rejected without justification. Similarly, BCCI's request for cross-examination of persons whose statements were relied upon in the Complaint was rejected, despite the statements being used against BCCI. 29. The impugned order is unreasoned and contrary to Rule 4(9) of the Rules, as it fails to provide reasons for rejecting BCCI's request for documents as well as its request for adjournment of the hearing dated 7 May 2018. Further, Section 16(6) of FEMA requires disposal of complaints within one year from receipt. In the present case, the complaint remained pending for nearly six and a half years before the impugned order was passed. ADJUDICATION PROCEEDINGS WERE ARBITRARY AND VIOLATIVE OF NATURAL JUSTICE ....
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....ed only the net amount after adjustment against sums receivable from CSA from ticket sales. The actual amount payable to CSA was INR 48,56,00,781, which was duly remitted. NO DELAY IN REPATRIATION OF TICKET REVENUE OR POURING RIGHTS REVENUE 36. No allegation regarding delayed repatriation of ticket revenue formed part of Show Cause Notice No. IX. Such allegation was introduced only in the impugned order. In any event, CSA had withheld payment of ticketing revenue due to pending settlement of amounts payable by BCCI to CSA. The right to claim such ticket revenue crystallized only after final settlement on 27 August 2010, whereafter the amount was repatriated. Similarly, revenue from Pouring Rights had in fact been repatriated to India. There existed a dispute between CSA and the stadium owners in South Africa concerning such rights. BCCI took all necessary steps and eventually succeeded in repatriating the said revenue. Mere delay in repatriation, without more, is insufficient to attract penalty. WITHOUT PREJUDICE, PENALTY OUGHT TO BE REDUCED OR NOT LEVIED 37. Assuming without admitting that any technical contravention of FEMA occurred, the same was inadvertent and witho....
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....ed to remittances made by BCCI after the suspension of the Appellant on 26.04.2010. Likewise, no penalty was imposed in Show Cause Notice No. 11. These instances themselves indicate that transactions undertaken after the Appellant's suspension were outside his control and responsibility. Remittances Made by BCCI Were Current Account Transactions and not Capital Account Transactions. 42. The impugned order proceeds on a fundamentally erroneous premise by treating remittances made by BCCI to Cricket South Africa ("CSA") as "capital account transactions" instead of "current account transactions". The learned Adjudicating Authority held that the remittances constituted a "contingent liability" and, solely on that basis, classified them as "capital account transactions". This conclusion is ex facie unsustainable and contrary to law. 43. The remittances made by BCCI to CSA cannot, by any stretch of imagination, be regarded as contingent liabilities. A contingent liability is one that may or may not arise depending upon the occurrence of an uncertain future event. Where the future event is certain and concluded, the liability cannot be described as contingent. 44. In the pres....
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....s were permissible and did not require prior approval of the Reserve Bank of India. Therefore, the very foundation of the impugned finding collapses. 49. The Appellant stood suspended from BCCI-IPL on 26.04.2010. Consequently, he cannot be made liable for any act, omission, or liability arising thereafter. Any remittances made after his suspension, including the last remittance dated 27.08.2010, had no connection whatsoever with the Appellant, and no liability can be attributed to him for actions taken after his removal. 50. The Appellant was never an office bearer of BCCI. Under the Memorandum and Rules of BCCI. The term "Office Bearer" is specifically defined to include only the President, Honorary Secretary, Honorary Joint Secretary, and Honorary Treasurer. Admittedly, the Appellant never held any of these positions. 51. The Appellant was only the Chairman of the IPL Sub-Committee, which was one among several sub-committees of BCCI, such as finance, legal, and office bearers under the BCCI Rules committees. This position does not fall within the defined category of office bearers under the BCCI Rules. 52. Since the Appellant was not an office bearer, to do the manage....
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....ere taken by N. Srinivasan. These findings clearly exclude the Appellant from the scope of Section 42(1). 59. Despite the above findings, liability has been imposed merely on the premise that the IPL Chairman held an important position and exercised control over IPL affairs in South Africa. Such reasoning is wholly alien to Section 42(1). Supervisory involvement in IPL matters cannot substitute the statutory requirement of being in charge of, and responsible for, the business of BCCI itself. There is no finding that the Appellant had financial powers, authority over bank accounts, or any role in foreign exchange remittances or regulatory approvals. Supreme Court Law on Vicarious Liability 60. The Hon'ble Supreme Court has consistently held that vicarious liability cannot be presumed merely from designation. In Susela Padmavathy Amma v. Bharti Airtel Ltd. reported in 2024 (12) SCC 1) the Court reiterated that even a Director is not automatically responsible for day-to-day affairs of a company. Liability can arise only where specific allegations exist and established that the person was in charge of and responsible for the conduct of business. Similar principles were lai....
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..... Submissions on behalf of the respondent: 1. Failure of the Authorised Dealer to Exercise Due Diligence 67. It was submitted that State Bank of India, being the Authorized Dealer, failed to exercise the degree of due diligence required under law while processing the impugned foreign remittances. The learned Adjudicating Authority, after considering the submissions advanced on behalf of the Appellants, rightly concluded that the Bank failed to properly examine the bona fides of the transactions undertaken by Board of Control for Cricket in India ("BCCI"). The Bank acted in casual and negligent manner in permitting remittances without exercising the caution, scrutiny, and vigilance expected from an Authorised Dealer under FEMA. 2. Transfer Instructions Issued Even Before Execution of Agreement 68. It was submitted that the record clearly reflects that even prior to execution of the agreement dated 30.03.2009, Shri Pandove had already submitted two transfer instructions to State Bank of Travancore on 28.03.2009 for telegraphic transfer of US$ 80,00,000. The said amount was proposed to be remitted through two separate transfers of US$ 70,00,000 and US$ 10,00,000 respect....
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....relevant time. This stands admitted by the Appellant in his statement before the Department. As the officer handling these remittances, it was his primary duty to secure adequate supporting documents, verify the nature of the remittances, and satisfy himself regarding their legality and permissibility before allowing the transactions. His failure to do so amounts to dereliction of duty. 7. Contradictory Explanation Given in Statement 73. It was further submitted that while explaining the remittance of USD 1,03,62,799.42 (ZAR 7,61,48,959) made from the EEFC Account No. 57027644400 of BCCI, Shri A.K. Nazeer Khan, in his statement dated 10.12.2010, stated that the said remittance was made to CSA on the instructions of BCCI towards "the balance and final payment of expenses in IPL 2009." However, the corresponding A-2 Forms described the purpose of the remittance differently, namely as "Operational Fee and Cost for Hosting IPL 2009." It is therefore submitted that there exists a clear contradiction between the purpose stated in the official A-2 Forms and the explanation subsequently given by Shri A.K. Nazeer Khan in his statement. It is, therefore, prayed that this Hon'ble Tr....
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....the statements of Shri Prasana Kannan, who was then Manager, Business Commercial IPL, and Shri Sunder Raman, who was then Chief Operating Officer of IPL, that all invoices, bills, vouchers, and other payment documents relating to vendors and individuals in South Africa were finally verified and approved by Shri N. Srinivasan. It was also revealed that Shri N. Srinivasan played a crucial and decisive role in the finalisation of the agreement with CSA, which was ultimately signed by him as Secretary of BCCI. Further, Shri M.P. Pandove, in his statement before the Department, stated that instructions for making payments to CSA were received by him from the then Secretary of BCCI, namely Shri N. Srinivasan, and it was upon such instructions that funds were remitted to CSA. These facts clearly indicate that the Appellant was directly involved in the financial and operational decisions concerning the impugned remittances. 79. The learned counsel for Shri M.P. Pandove further stated that pursuant to decisions of the IPL Governing Council and Working Committee, BCCI transferred funds on the strength of authorisation of the IPL Chairman and approval of the Honorary Secretary. Thus, while....
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.... sufficient opportunity to present his defence through counsel as well as through written submissions. 84. The allegation of the Appellant that the call notice dated 24.04.2018 was the first personal hearing granted in the matter is entirely false, misleading, and untenable. 85. The record shows that a call notice dated 06.06.2013 had already been issued to the Appellant fixing the matter for personal hearing on 19.06.2013. In response thereto, a letter dated 18.06.2013 was received from the Appellant's Advocates seeking adjournment of the scheduled hearing which was granted. 86. Another call notice dated 15.04.2015 was issued to the Appellant fixing the matter for personal hearing on 15.06.2015. On the said date, Advocates from M/s Beri & Co. appeared on behalf of the Appellant before the Adjudicating Authority sought an adjournment in order to file a further reply to all the Show Cause Notices. Considering the request made by the Appellant's counsel, the next date of hearing was fixed for 29.07.2015. This itself shows that adequate accommodation and procedural fairness were extended to the Appellant. 87. The written submissions were then filed on behalf of the....
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....sions during the personal hearing. Thus, the Appellant was effectively represented by senior and experienced legal counsel. 93. It was further submitted that after conclusion of the personal hearing held on 07.05.2018, a letter dated 08.05.2018 was received from the Advocates for the Appellant stating that detailed written submissions would be filed within one week. Thereafter, detailed written submissions dated 15.05.2018 were duly filed on behalf of the Appellant. This clearly demonstrates that even after oral hearing, further opportunity was granted to place detailed submissions on record. 94. In view of the foregoing facts, it is evident that the call notice dated 24.04.2018 fixing hearing on 07.05.2018 was not the first personal hearing, as falsely alleged by the Appellant. The Appellant was granted multiple opportunities of personal hearing spread over several years and had also filed multiple written submissions during the course of proceedings. Accordingly, the contention that only one hearing was granted is misleading, factually incorrect, and devoid of merit. 95. It was submitted that the Appellant's contention that no opportunity was granted for inspection o....
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....") were in the nature of current account transactions and, therefore, required no prior permission from the Reserve Bank of India ("RBI"). On that basis, the Appellant claimed that the charges alleged under FEMA should fail. Those contentions were specifically considered and categorically rejected by the learned Adjudicating Authority. The Authority held that the remittances in question: a) were not supported by any approved budget at the time of execution of the Heads of Agreement; b) were open-ended, indeterminate, and contingent in nature; and c) continued even after the conclusion of IPL-02. Accordingly, the plea of the Appellant was rightly rejected. 102. It was submitted that at the time of signing the agreement, no approved or fixed budget existed with respect to the expenditure proposed to be incurred. In the absence of any approved budget, the quantum of expenditure remained unrestricted, uncertain, and discretionary. Such an arrangement created contingent liabilities outside India and therefore squarely falls within the definition of capital account transactions under Section 2(e) of FEMA. 103. The facts on record clearly establish that th....
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....e commercial agreement for trade or services creating mutual rights and obligations. It was rather created as a mechanism designed to circumvent the provisions of FEMA in relation to foreign exchange transferred by BCCI to CSA and to lend an appearance of legitimacy to such remittances. 111. Under the agreement, BCCI was required to make payment of US$ 30,00,000 to CSA as a fixed fee towards service charges within fifteen days of the last match of IPL-2009. However, no remittance corresponding to such fixed service fee was separately made. 112. Similarly, under Clause 4(c) of the agreement, BCCI was required to pay US$ 25,00,000 to CSA within seven days of signing the agreement for meeting expenses of IPL-02. Yet, the remittance details do not disclose any specific remittance made in compliance with this stipulation. These facts clearly indicate that the remittances actually made were not in tune with the contractual obligations contained in the agreement. Instead, BCCI arbitrarily remitted an aggregate amount of US$ 4,98,62,799.42 (equivalent to Rs. 243,45,30,781) during the period from 31.03.2009 to 27.08.2010 without disclosing the true purpose of remittances. 113. It i....
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....o opportunity of hearing was granted is wholly misconceived and misleading. The learned Adjudicating Authority granted every opportunity of hearing in accordance with FEMA provisions. A call notice dated 06.06.2013 was issued to BCCI fixing the matter for hearing on 19.06.2013. In response, a letter dated 17.06.2013 was received from the Appellant's Advocates, seeking adjournment. Another call notice dated 15.04.2015 fixed hearing on 15.06.2015. Advocates for the Appellant appeared and sought adjournment for filing replies to all Show Cause Notices. Upon request, the next date was fixed as 29.07.2015. 121. On 29.07.2015, the Advocates along with their Chartered Accountant appeared and undertook to file a `Note' on Arguments by 04.08.2015, which was duly filed. Thereafter, by communication dated 19.11.2015, the Adjudicating Authority responded to and clarified each objection raised in the written note. A fresh call notice dated 26.04.2017 fixed hearing on 01.06.2017. By letter dated 26.05.2017, M/s Cyril Amarchand Mangaldas sought adjournment for eight weeks due to change in management of BCCI following orders of the Hon'ble Supreme Court. The matter was then fixed on 27.....
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....) against such bills and invoices. These facts establish that the Appellant was deeply involved in the operational and financial arrangements concerning IPL-2. 126. The Appellant's contention that he was not an office bearer of BCCI stands negated by his own conduct and role in the transactions. The Appellant personally held discussions with officials of CSA before execution of the agreement between BCCI and CSA. He remained at the forefront of the organization in South Africa. In fact, the Appellant travelled to South Africa and participated in negotiations with CSA along with other BCCI officials for holding the tournament there. These facts have also emerged from statements recorded from various office bearers and officials. 127. Shri Prasanna Kannan, in his statement before the Department, stated that all decisions regarding appointment of vendors and approval of invoices were taken by Shri Lalit Modi and thereafter sent to him for further processing and payment. He further stated that vendors used to negotiate and finalise the scope of services and cost of services with Shri Lalit Modi. Thereafter, the Appellant would either approve the same or send communications on....
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.... minutes of the Emergent Working Committee meeting of BCCI held on 22.03.2009, wherein Shri Lalit Modi requested approval for opening an account of US$ 10 million to meet expenses for staging IPL abroad. In response, Shri Shashank Manohar stated that such account would be opened after obtaining RBI clearance and would be operated by the Honorary Treasurer Shri M.P. Pandove. 132. Thus, the necessity of obtaining RBI approval for opening an overseas account was a well-known fact to the Appellant at the time the subject remittances were made to CSA. 133. In view of the above facts, it is respectfully submitted that the learned Adjudicating Authority rightly invoked Section 42(1) of FEMA in respect of the violations committed by BCCI. The adjudication order discusses in detail the responsibility and role of the Appellant in the findings recorded therein. Despite full opportunity, the Appellant failed to furnish any satisfactory explanation for the FEMA contraventions. 134. It was further submitted that the adjudication proceedings were conducted fully in consonance with the provisions of FEMA and due process of law was followed throughout. The Appellant was granted ample oppor....
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....ign securities; (e) "capital account transaction" means a transaction which alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India or assets or liabilities in India of persons resident outside India, and includes transactions referred to in sub-section (3) of section 6; (j) "current account transaction" means a transaction other than a capital account transaction and without prejudice to the generality of the foregoing such transaction includes,- (i) payments due in connection with foreign trade, other current business, services, and short-term banking and credit facilities in the ordinary course of business, (ii) payments due as interest on loans and as net income from investments, (iii) remittances for living expenses of parents, spouse and children residing abroad, and (iv) expenses in connection with foreign travel, education and medical care of parents, spouse and children; 3. Dealing in foreign exchange, etc.-Save as otherwise provided in this Act, rules or regulations made thereunder, or with the general or special permission of the Reserve Bank, no person s....
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.... (4) A person resident in India may hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India. (5) A person resident outside India may hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such person when he was resident in India or inherited from a person who was resident in India. (6) Without prejudice to the provisions of this section, the Reserve Bank may, by regulation, prohibit, restrict, or regulate establishment in India of a branch, office or other place of business by a person resident outside India, for carrying on any activity relating to such branch, office or other place of business. (7) For the purposes of this section, the term "debt instruments" shall mean, such instruments as may be determined by the Central Government in consultation with the Reserve Bank". 8. Realisation a....
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....e, regulation, notification, direction or order made thereunder: Provided that no such authorisation shall be revoked on any ground referred to in clause (b) unless the authorised person has been given a reasonable opportunity of making a representation in the matter. (4) An authorised person shall, in all his dealings in foreign exchange or foreign security, comply with such general or special directions or orders as the Reserve Bank may, from time to time, think fit to give, and, except with the previous permission of the Reserve Bank, an authorised person shall not engage in any transaction involving any foreign exchange or foreign security which is not in conformity with the terms of his authorisation under this section. (5) An authorised person shall, before undertaking any transaction in foreign exchange on behalf of any person, require that person to make such declaration and to give such information as will reasonably satisfy him that the transaction will not involve, and is not designed for the purpose of any contravention or evasion of the provisions of this Act or of any rule, regulation, notification, direction or order made thereunder, and wh....
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....this section- (i) "company" means any body corporate and includes a firm or other association of individuals; and (ii) "director", in relation to a firm, means a partner in the firm". Schedule-II of FEMA (Current Account Transactions) Rules of 2000 is also quoted hereunder along with Rules 3 to 6 of the Rules of 2000: TRANSACTIONS WHICH REQUIRE PRIOR APPROVAL OF THE CENTRAL GOVERNMENT [Substituted by G.S.R. 512(E), dated 27-7-2005, for "See rule 4"](see Rule 4)] Purpose of Remittance Ministry/Department of Govt. of India whose approval is required 1. CulturalTours Ministry of Human Resources Development, (Department of Education and Culture) 2. [ Advertisement in foreign print media for the purposes other than promotion of tourism, foreign investments and international bidding (exceeding USD 10,000) by a State Government and its Public Sector Undertakings [Substituted by S.O. 301(E), dated 30-3-2001] Ministry of Finance, (Department of Economic Affairs] 3. Remittance of freight of vessel chartered by a PSU Ministry of Surface Transport, (Chartering Wing) 4. Payment of import [through ocean transport] [Insert....
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....ovided that this rule shall not apply where the payment is made out of funds held in Resident Foreign Currency (RFC) Account of the remitter. 6. (1) Nothing contained in rule 4 or rule 5 shall apply to drawal made out of funds held in Exchange Earners' Foreign Currency (EEFC) account of the remitter. (2) Notwithstanding anything contained in sub-rule (1), restrictions imposed under rule 4 or rule 5 shall continue to apply where the drawal of foreign exchange from the Exchange Earners Foreign Currency (EEFC) account is for the purpose specified in items 10 and 11 of Schedule II, or item 3, 4, 11, 16 & 17 Schedule III, as the case may be". 139. The relevant provisions of the Act have been quoted to find out as to whether a case advanced by the appellants is made out for challenge to the order passed by the Special Director of Enforcement imposing penalty on the appellants for contravention of Section 4 r/w Section 9 of the Act of 1999 r/w Regulations 3 and 4 and Para 3 of the Schedule of FEM (Foreign Currency Account by a Person Resident in India) Regulations, 2000. It is also of Section 6 of the Act of 1999 r/w Regulations 3&5 of FEM (Borrowing or Lending in....
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....he reason that the remittance was not for "Capital Account Transaction" but was for "Current Account Transaction". 142. The condition to make out a case under "Current Account Transaction" was stipulated under the Heads of Agreement dated 30.03.2009. The respondent, however, treated the remittance under the head of "Capital Account Transaction" and accordingly, penalty was imposed in absence of prior approval of the RBI for remittance. The issue for our decision would be as to whether Heads of Agreement dated 30.03.2009 would fall under the "Capital Account Transaction" or the "Current Account Transaction" though according to the appellants, the show cause notice caused to them was without a specific allegation that the remittance would fall under the "Capital Account Transaction" and not the "Current Account Transaction" and, therefore, an argument was raised that without a notice, the Special Director could not have passed an order for which no hearing was provided to the appellants. The issue aforesaid would also be considered; however, we would be dealing with the first issue and the issue connected with it would be dealt with subsequently but has been referred for the purpo....
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....t is made from the account of a remitter. Rule 6 of the Rules of 2000 referred to the exclusion of the applicability of Rules 4 and 5, if the drawls are made from the funds held in Exchange Earners Foreign Currency (EEFC) account. However, sub-rule (2) explains that notwithstanding anything contained in sub-rule (1), restriction imposed under Rules 4 and 5 shall continue to apply where the drawl of foreign exchange from the EEFC account is for the purpose specified in Items 11 and 12 of the Schedule or the Item 3,4,11,16 and 17. The case of the appellants to fall under entry 9 to the Schedule-II being an International/National body. Thus, it was submitted that the remittance did not warrant a prior approval even of the Central Government. 146. To analyze the issue, we are required to refer the definitions of "Capital Account Transaction" so as the "Current Account Transaction". Both the definitions have been quoted earlier. The Capital Account Transaction covers the transaction which alters the assets or liabilities, including contingent liabilities, outside India of persons resident in India or assets or liabilities in India of persons resident outside India, and includes trans....
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....hs, ensure that BCCI-IPL is able throughout the term and without any restriction of any kind whatsoever to offer for sale tickets for the whole of the spectator viewing area at each stadium and for each match (including each and every seat, spectator stand, hospitality box or other such facility each such stadium. (c) It is acknowledged that certain third parties are entitled to be offered the right to occupy certain hospitality boxes for events within the stadia. In this regard, BCCI-IPL shall after having sold/used such amount of such hospitality boxes for its own purposes (which CSA shall ensure does not cause BCCI-IPL to suffer any claim, costs, damages or losses) offer such third parties the first right (on the same terms as are being offered to either potential purchasers) to purchase the right to occupy such boxes for all (and not some only) of the matches to be staged at each relevant stadium but if such third parties do not want to purchase this right for all such matches then such first right shall lapse and such third parties shall enjoy no presential rights in respect of such boxes. In audi, the parties shall discuss and agree the extent to which any CSA VIP in....
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....cy service staff etc.. • all necessary medical and other emergency service for use by players, spectators and any other third party at each stadium together with at least three ambulances at each match. • dedicated and suitably qualified and experienced support staff to assist BCCI-IPL (who shall work with and under the supervision of the venue manager, tournament directors, security/ firms and other third parties appointed by BCCI-IPL ) including a stadium executive an accreditation executive, security manager and a medical manager. (e) CSA shall ensure that the Stadia have all necessary licence and permits in connection with the staging of each match are... with the requirements all applicable ...... in respect of all health and safely requirements. In addition, CSA shall throughout the term take out or maintain all such insurance) as would be required by law and /or otherwise normally taken out in connection with the staging of a matches and the IPL in general (whether on match days or otherwise during the term) and shall name BCCI-IPC and each IPL franchisee as a named party on such policies of insurance. (f) CSA shall be responsible ....
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....A of its services and assistance in connection with IPL-BCCI-IPL shall pay to CSA a fixed fee of US $3,000,000 (the "Fee") which shall be payable within 15 days of the last of Match in 2009. In addition to the Fee BCCI-IPL shall in accordance with paragraph (c) below pay those costs and expenses in relation to IPL which are set out in the budget attached as Schedule (2) to these Heads of Agreement (the" IPL Budget" and "Budgeted" shall be construed accordingly) (b) If BCCI-IPL is obliged to deduct any withholding tax from the fee or any other sum payable by it under theses Heads of Agreement then it shall be entitled to make such deduction and shall as soon as practicable provide CSA with a certificate of deduction in respect of such withholding tax from the relevant authority. All costs to be incurred by CSA in performing its obligations under these Heads of Agreement shall be included in the FEE and the IPL Budget such that no other payments shall be due from BCCI-IPL to CSA in Connection with IPL. (c) BCCI-IPL shall pay CSA USD 2,500,000 within 7 days of signature of these heads of agreement to enable the budgeted costs to be paid by CSA (such sum being the par....
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....)These Heads of Agreement shall constitute a legally binding agreement between the parties. (b)Neither party may assign or transfer these Heads of Agreement to any third party but CSA acknowledges that BCCI-IPL shall use third party representatives and contractors connection with the staging of IPL and CSA agrees to work with the same. (c) Each party shall keep the existence of these Heads of Agreement and their contents strictly confidential. (d)CSA shall indemnify BCCI-IPL from and against any damages or cost incurred by BCCI-IPL (or its representatives) which results from any breach by CSA of these Heads of Agreement. (e) These Heads of Agreement shall be governed by and constructed in accordance with India Law and any dispute arises in connection with them shall be decided by Arbitration in Mumbai, India". 147. The quoted clauses of the Agreement reveal no provision for alteration of assets or liabilities, including contingent liabilities, outside India of person resident in India. Rather, clauses indicate an agreement to obtain services to conduct IPL tournament outside India for the first time. The type of service to be provided by CSA h....
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....is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen. The enforcement of contracts contingent on an event happening. - It would remain contingent if the happening is not certain i.e. it may take place or it may not. But where the event is certain with specified clauses, to embark upon, the issues of service and the expenses to be borne by the parties, it cannot be said to be a case of contingent agreement for creating contingent liability". If the facts of the case are looked into minutely, IPL tournament was conducted in South Africa in terms of the agreement and, therefore, happening was not contingent. It is with further arrangement for extension of the service by the CSA for smooth organization of the tournament which included arrangement of Stadia, tickets, its distribution and all other ancillary services to conduct the IPL. It is coupled with the fact that in terms of the agreement, tournament took place within the scheduled time. It was with the payment towards service extended by the CSA. There was no element of alternation of assets or liabilities including contingent liabilities of a person resident i....
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....r the reason that it was not given at the time of request for remittance to the authorized dealer. The perusal of the facts on record does not fortify the argument raised by the respondent. The argument of the respondent that agreement was a piece of document to avoid compliance of the Act of 1999 cannot be accepted not only looking to the nature of the agreement, but the circumstances requiring BCCI to shift the tournament all of sudden outside the country. The expenses were borne by the BCCI as per the agreement from time to time and it cannot be said to be towards the contingent liability. It is not only for the reason that services were specified in the agreement for holding IPL tournament outside the country. The fact, further remains that payment of fixed amount of USD 3 million to the CSA for the service is also indicative of the fact to fall under the definition of "Current Account Transaction". 152. Any payment due in connection with foreign trade, other current business, services, short-term banking and credit facilities in the ordinary course of business falls under the definition of "Current Account Transaction" and, therefore, only when the authorized dealer made th....
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.... be shifted from India to South Africa all of a sudden due to security reasons on account of Parliamentary Election. The agreement, however, specified all the heads of expenses towards the service and, in fact, if the facts of the case are taken up, IPL tournament was successfully conducted in South Africa and all the remittances were made, as described in the agreement and thus it cannot be said to be a case of contingent liability. 156. We have considered the submissions aforesaid and find that if, in a given case, the payment towards the service was made from time to time and that too without budgeting, then, according to the respondent, it would fall in the definition of "Capital Account Transaction". We are unable to accept the argument advanced by the respondent. It is for the reason that the definition of "Capital Account Transaction" under Section 2(e) of the Act of 1999 covers all transactions which alters the assets or liabilities, including contingent liabilities, outside India. The transaction involved in the present matter does not fall within the definition of "Capital Account Transaction" because it has not altered the assets or liabilities of the person resident ....
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....he BCCI and others in the Show Cause Notice No. I. The authority below did not record separate finding to the charges to avoid duplication. Therefore, no separate penalty in reference to the Show Cause Notice No. II exists. 159. So far as the Show Cause Notice No. III is concerned, the competent authority found that the charge in the Show Cause Notice No. 1 is involving the same allegation and against the same entity and accordingly it did not find reasons to pass separate order to the Show Cause Notice No. III. 160. So far as the Show Cause Notice No. IV is concerned, it was again found to be covered by the Show Cause Notice No. I and taking it to be nothing but duplication of charge, the competent authority did not proceed with the charge alleged in the Show Cause Notice No. IV. 161. It is necessary to clarify that Charge No. IV was, in fact, considered while dealing with the Show Cause Notice No. VIII. The finding in reference to the facts given in Show Cause Notice No. IV were taken into consideration and finding was recorded on it. In fact, the allegation levelled in the Show Cause Notice No. IV with its contents had been dealt with while dealing with the Show Cause N....
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....s service, separate account was opened from where the transfer of amount was made to the CSA. It is said to be in contravention of the provisions of the Act of 1999 only for the reason that the BCCI was having absolute control on the dedicated bank account without realizing the purpose of opening of dedicated bank account and to fall under Section 9(e) of the Act of 1999. The perusal of the order otherwise shows that even, according to the authority below, the dedicated account got opened and operated by the BCCI through the medium of CSA for the purpose of meeting the expenses incurred for the IPL tournament, without subjecting themselves to an audit or scrutiny by any Indian Authorities. The respondent have made the issue unnecessarily without showing how opening of a dedicated account to meet with the expenses of CSA towards the service rendered for IPL tournament was in contravention of the provisions of the Act of 1999 and regulations. The exemption under Section 9(e) has been ignored. The authority even ignored that payment towards service would fall in the definition of "Current Account Transaction". The finding in reference to it is thus interfered and set aside. Show Ca....
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....t, has been ignored by the competent authority. The finding is that the agreement was not providing any loan agreement between the CSA and BCCI or there was any transaction in the nature of interest payment between CSA and BCCI to make out allegation of loan or borrowing. The finding aforesaid is contrary to the facts on record. It cannot be said to be a case of contravention of the Act of 1999 and Regulations made thereunder. We are unable to accept the finding recorded by the competent authority to be a case of borrowing and lending, rather we cause interference in the finding recorded therein. Show Cause Notice No. VIII 167. The order in reference to the Show Cause Notice No. VIII has been given by the authority below. However, it is while dealing with the allegation made in the Show Cause Notice No. IV. The fact aforesaid has also been clarified in Para 92 of this order. The Show Cause Notice in original was for contravention of Section 6(3)(d) of the Act of 1999 and Regulations 3 and 5 of the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 for a sum of US$ 60,00,143 equivalent to Rs. 30,00,07,150/-. The issue aforesaid has not bee....
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....11 of Schedule-II and entry 3,4,11 and 16 of Schedule-III. 169. It is not in dispute that the subsequent remittances were made from the EEFC account of the BCCI, which is permissible as per Rules 6 of the Rules of 2000 without approval of the RBI and even the Govt. of India in view of the fact that the BCCI comes under entry 9 to Schedule-II as it is an international/state level sports body. Schedule-II has been quoted earlier. In the light of the aforesaid, remittance from the EEFC account could not have been taken to be in contravention of the Rules of 2000. The fact, however, remains that the remittance should have been in consonance to the agreement between the parties and if the facts of this case are taken into consideration, the permissible remittance from EEFC account was of Rs. 4,40,01,581/- and thereby there was an excess remittance of Rs. 44,15,99,200/- which is in contravention of the provisions of the Act of 1999 and Rules of 2000. The competent authority thus correctly examined the issue to find out as to what was the amount shown towards the current liability under the head of the amount paid to CSA. The due amount in the books of account was of a sum of Rs. 4,40,....
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....of more than a year and imposed penalty for contravention of Section 10(6) of the Act of 1999 along with the Regulations, 2000. The reason for delay has been attributed on account of dispute and that account was mingled with others. It has been discarded by the authority below. The facts on record do not make out a case in favour of the appellant in regard to the delay of more than a year in repatriation. It is said to have happened in August, 2010 while the agreement ended in May, 2009 itself. The settlement of account does not justify delay of 15 months. It is not of few days to justify the delay. A case of contravention of Section 8 of the Act of 1999 is made out and we decide the issue against the appellant. However, the penalty of Rs. 4 Crores imposed on the BCCI is too excessive because repatriation of the amount has taken place and accordingly it is reduced to Rs. 1 Crore. 175. The penalty has been imposed even on Shri Lalit Kumar Modi in ignorance of his position and even suspension. He was not in-charge of the affairs and otherwise he has been framed in the case without any material showing his responsibility. The penalty imposed on Shri Lalit Kumar Modi is wholly erron....
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....ssue as to whether the amount towards "pouring rights" was due and receivable by the BCCI so as to allege contravention. We according set aside the order passed in pursuance to Show Cause Notice No. X and thereby interfere in the penalty. Show Cause Notice No. XI 179. Show Cause Notice No. XI was given for contravention of Section 9 of the Act of 1999 and Regulation 3&4 read with para 1(2) and para 2 Schedule II of Foreign Exchange Management (Foreign Currency Account by a Person resident in India) Regulations, 2000. It is for crediting an amount of Rs. 41,72,19,671.70 in the EEFC account with State Bank of Travancore, Jaipur. According to the appellant BCCI, the regulation permits credit into EEFC account of all foreign exchange earnings. As per the agreement, CSA was bound to pay BCCI an amount equivalent to the revenues out of the sale of tickets and VAT refund. It was remitted by BCCI on 27.08.2010 and USD 89,34,040 was credited in EEFC account out of the sale of tickets and VAT refund. 180. The authority below has not accepted the argument of the learned counsel for the appellant mainly on the ground that it did not represent permissible credits as stipulated under pa....
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....nst Shri A.K. Nazeer Khan, the then Chief Manager of State Bank of Travancore, Jaipur. It was for remittance of the foreign exchange by the authorized dealer without prior approval of the RBI treating it to be a case of "Current Account Transaction". We have already decided the issue holding it to be a case of "Current Account Transaction" and not "Capital Account Transaction". Thus, remittance by the authorized dealer without permission of the RBI cannot be said to be in contravention of the Act of 1999 because no approval or permission by the RBI was required. It is, therefore, only when the authorized dealer informed about the remittance to the RBI, no objection to it was made at any time by the RBI. Thus, the finding in reference to Show Cause Notice No. XII along with the penalty is interfered. At this stage, we may refer to the argument of the learned counsel for the bank about certain safeguards to the authorized dealer when they act bona fide. We find a case is made out even within the framework of Section 10 (5) of the Act of 1999 and other provisions permitting safeguard to the authorized dealer. In this case, the authorized dealer made remittance in reference to Form A-2....