TaxTMI 
TaxTMI 
2026 (9) TMI 743
X X X X Extracts X X X X
X X X X Extracts X X X X
....ized movable properties comprise of shares of the Estate of Late Shri Anil Salgaocar held in 33 Indian Companies. The seizure was effected because there were reasons to believe that the Estate of Late Shri Anil Salgaocar had acquired abroad, foreign exchange worth USD 69,06,50,641 amounting to Rs. 5718,58,73,074.80, as on 08.08.2023, calculated at the rate of Rs. 82.80 per USD. 2. Ld. Counsel for the Appellant submitted that the Impugned Order has confirmed the seizure of the shares held by the Estate of Late Shri Anil Salgaocar in 33 Indian Companies. The Appellant namely Smt. Lakshmi Anil Salgaocar is the administratrix of the Estate. Ld. Counsel submitted that in the Seizure Order, it is the case of the Respondent that an investigation under FEMA was initiated against Shri Anil Salgaocar (AS) on the basis of Panama and Pandora Paper leaks, wherein it had been alleged that AS incorporated certain companies in the British Virgin Island ("BVI"). Ld. Counsel further submitted that the Respondent has claimed that the investigation revealed that AS had filed Suit No. 821 of 2015 ("Singapore Suit") before the General Division of the High Court of the Republic of Singapore ("Singapor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lso pertinent to note that the Singapore Judgment has already been challenged by the defendant therein before the Appellate Division of the Singapore High Court ("Singapore Appellate Court") at the time of filing of the Petition, and the same is currently pending adjudication. There was no other material placed on record by the Respondent to substantiate the vague allegations of contravention of Section 4 of FEMA by AS. The Respondent's contentions were solely based on a selective reading of the contents of the Singapore Suit without regard to the outcome of the suit or the present status thereof. 4. Ld. Counsel for the Appellant stated that Section 37A of FEMA was introduced by way of Section 142 of the Finance Act, 2015 on 14.05.2015, and came into force with effect from 09.09.2015. Ld. Counsel argued that Section 37A of FEMA cannot be applied retrospectively to contraventions of Section 4 that are alleged to have been committed prior to Section 37A of FEMA coming into force, as held by this Tribunal in Ashwani Kumar Mehra & Ors. v. A.H. Khan 2018 SCC OnLine ATFEMA 24 ("Ashwani Kumar Mehra"). The decision in Ashwani Kumar Mehra was passed by a two-member bench of this Trib....
X X X X Extracts X X X X
X X X X Extracts X X X X
....so as to takeaway an existing right or to impose a new liability. In this regard, Ld. Counsel cited the Judgments of the Hon'ble Supreme Court in CIT v. Vatika Township (P) Ltd., (2015) 1 SCC 1; Hitendra Vishnu Thakur v. State of Maharashtra, (1994) 4 SCC 602; State of Madhya Pradesh v. Rameshwar Rathod, (1990) 4 SCC 21. Ld. Counsel further argued that Respondent has completely abdicated the investigative powers conferred on it, and has merely relied upon a selective reading of the contents of the Singapore Suit. The Singapore Judgment was limited to shares of entities other than the five BVI Companies referenced in the Seizure Order and the Petition, and did not deal with Subject Foreign Exchange in any manner. Moreover, the Singapore Judgment has already been challenged by the defendant therein before the Singapore Appellate Court, and its enforcement remains subject to the outcome of the said Appeal. The Respondent Directorate had itself noted in the SCN of 2018 that information arising out of Suit 821 was to be "further investigated as per the outcome of the pending suit", and therefore it was not open for the Respondent to suspect any contravention of Section 4 of FEMA. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ishee Notice issued by the Income Tax Department, it has been noted vide order dated 29.08.2024 in W.P.(C) 14567/2023 that: "1. Mr. Kapil Sibal, learned senior counsel, who appears on behalf of the petitioner, submits that in view of the subject shares [concerning the companies located in Singapore and British Virgin Islands] having been transferred to respondent no. 4, he has instructions not to press the above-captioned writ petition." Ld. Counsel stated that it is seen from the memo of parties of the abovementioned W.P. that Respondent No. 4 therein was the Appellant herein i.e. Smt. Lakshmi Anil Salgaocar. Therefore, Ld. Counsel argued that the trigger events giving rise to the violation of Section 4 of FEMA have all occurred post September 2015 i.e. when Section 37A was inserted in FEMA. 7. Ld. Counsel for the Respondent Directorate contended that the provisions of Section 37 A of FEMA do not create new liabilities retrospectively but address the existing violations that are ongoing or having enduring effects post-enactment. The characterization of Section 37A of FEMA as a penal provision by the Appellant is incorrect, since it is a regulatory provision designed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....an Lal v. State of Rajasthan, (2015) 6 SCC 222. Ld. Counsel therefore contended that for the present case of a contravention under the FEMA, the date of coming into force of the Section 37A of FEMA i.e., 09.09.2015 is irrelevant if the FEMA contravention is continued to be committed on a date subsequent to the above date. To support his contention, Ld. Counsel relied upon the case of Gokak Patel Volkart Ltd. v. Dundayya Gurushiddaiah Hiremath (1991) 2 SCC 141, wherein the Hon'ble Supreme Court has held: "26. Applying the law enunciated above to the provisions of Section 630 of the Companies Act, we are of the view that the offence under this section is not such as can be said to have consummated once for all. Wrongful withholding, or wrongfully obtaining possession and wrongful application of the company's property, that is, for purposes other than those expressed or directed in the articles of the company and authorised by the Companies Act, cannot be said to be terminated by a single act or fact but would subsist for the period until the property in the offender's possession is delivered up or refunded. It is an offence committed over a span of time and th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....37A of FEMA. It was found in the enquiry by the Respondent Directorate that all the assets in India as well as abroad were held by the companies in which Late Shri Anil Salgaocar was the shareholder and after his demise all the shares were transferred in the name of Estate of Shri Anil Salgaocar which is being administrated by Smt. Lakshmi Salgaocar W/o Late Shri Anil Salgaocar. The Seizing Officer has recorded the following in the said Seizing Order: "12. Hence, I have reason to believe that Estate of Late Shri Anil Salgaocar acquired foreign exchange worth USD 69,06,50,641 (equivalent to Rs. 5718,58,73,074.80 as on 08.08.2023 calculated @ Rs. 82.80 per USD) in contravention of section 4 of Foreign Exchange Management Act, 1999 and therefore, the shares of Estate of Late Anil Salgaocar in 33 companies to the amount of INR 1,51,87,350, are liable to be seized in terms of the provisions of sub-section (1) of section 37A of FEMA. 1999 and in terms of G.S.R. 702(E) dated 16.09.2015 & G.S.R. 701(E) dated 16.09.2015 issued by the Central Government." 11. It is not disputed that the enquiry is based upon the Suit No. 821 of 2015 filed by the Late Shri Anil Salgaocar against S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Chinese market. The enquiry further revealed that it is detailed in the Suit filed by Late Shri Anil Salgaocar and later amended by the administrator of Estate of Shri Anil Vassudeva Salgaocar, Smt. Lakshmi Salgaocar that during the period from April 2004 to July 2012, Late Shri Anil Vassudeva Salgaocar group sold/exported about 22.75 million tons of iron ore in China through the aforesaid 5 BVI companies (of which Late Shri Anil Vassudeva Salgaocar was the beneficial owner), realizing turnover of USD 1,79,42,74,012/- and net trading profits of about USD 690,650,641/-. The Suit was decreed by the Singapore High Court in favour of the Appellant on 28.02.2023 as its evident from the Order dated 29.08.2024 passed by the Hon'ble Delhi High Court in W.P. (C) 14567/2023. It is noted in Paragraph 1.8 of the Impugned Order that from the perusal of the ITRs of Late Shri Anil Salgaocar for A.Y. 2014-15, 2015-16 and 2016-17 that neither the Companies floated in BVI and Singapore nor the profits derived from these Companies were declared by Late Shri Anil Salgaocar to the Indian Authorities. 12. It is pertinent to note the provisions of Section 37A (1) of FEMA. The provisions are as follows....
X X X X Extracts X X X X
X X X X Extracts X X X X
....641/- being acquired by the Estate of Late Shri Anil Salgaocar was subject to the Appeal filed by the other parties against the decision dated 28.02.2023 of Singapore High Court. However, we find that even in the petition No. W.P. (C) 14567/2020 filed by Shri Darsan Jhaveri, the other party in the Suit, before the Hon'ble Delhi High Court, it was noted in Order dated 29.08.2024 that the shares had been transferred to the Respondent No. 4 viz the Appellant herein. In the Impugned Order, it has been inferred in Paragraph 6 ix as follows: "It is also an undisputed fact that the Singapore Suit was decided in the favour of the Estate of AVS, however, Defendants in the Singapore Suit have preferred an Appeal against the Judgment dated 28 February, 2023 on 14 August, 2023, which remains pending till date. Hence, as on date decision of Singapore suit is in favour of the Respondents." The filing of Appeal which is pending before the Court does not change the fact of the acquisition and ownership of the foreign exchange by the Estate of Late Shri Anil Salgaocar. We cannot therefore accept the contention of the Appellant that the acquisition of the said profit amounting to around ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the profits which were allegedly acquired abroad arose from trading in iron ore from 2004 to 2012, the provisions of Section 37A of FEMA cannot be applied retrospectively. We find from the facts of the case that profits around USD 69,06,50,641 have been derived by the Five Companies in BVI viz Ling Tao Trading Limited, Sino Ling Tao Resources Limited, GBA Minmetals Trading Limited, Cheermark Global Limited and Joyking Global Limited through the iron ore trading activities of Late Shri Anil Salgaocar. It is also evident that Late Shri Anil Salgaocar and Shri Darsan Jhaveri entered into an agreement in December, 2003 not only to set up the aforementioned Special Purpose Vehicles (SPVs) in the BVI, but also to provide for the funding of investment and of expenses by Late Shri Anil Salgaocar. Shri Darsan Jhaveri was made a Shareholder/ Director/Bank Signatory of the SPVs to act in trust for Late Shri Anil Salgaocar and to act in accordance with the instructions of Late Shri Anil Salgaocar. In consideration for his role, Shri Darsan was to be paid consideration of USD 0.50 for each Wet Metric Ton of iron ore sold by the BVI Trading Companies. The five BVI Companies procured iron o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onsideration one has to read into the section the additional word "if acquired after the date of this Act" after the word "property". For this there is no justification." We further cite the Judgment of the Hon'ble Supreme Court in the case of Mohan Lal vs. State of Rajasthan (2015) 6 SCC 222. Following Paragraphs of the Judgment are being reproduced as follows: "24. In the instant case, Article 20(1) would have no application. The actus of possession is not punishable with retrospective effect. No offence is created under Section 18 of the NDPS Act with retrospective effect. What is punishable is possession of the prohibited article on or after a particular date when the statute was enacted, creating the offence or enhancing the punishment. Therefore, if a person is in possession of the banned substance on the date when the NDPS Act was enforced, he would commit the offence, for on the said date he would have both the "corpus" and "animus" necessary in law. xxxxx 29. We have dwelled upon the said submission, as the learned counsel for the State has seriously addressed that it is a continuing offence. We have already opined that on the date the NDPS Act came....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wned or controlled by a person resident in India;" We find there is nothing on record to show that the year wise stay in India, during the relevant period, of Late Shri Anil Salgaocar was only upto 182 days. The argument which has been advanced is that Late Shri Anil Salgaocar had been issued employment permits of Singapore. However, the aforementioned provisions of Section 2(v) of FEMA make it clear that a person, who has resided for more than 182 days in India may not be included as a person resident in India provided, he has gone out of India for taking up employment outside India or for doing business outside India or for any other purposes whereby the intention to stay outside India for uncertain period is indicated. In the absence of any evidence as to show that Late Shri Anil Salgaocar had gone out of India with intention to stay abroad for and uncertain period, we cannot agree with the proposition that Late Shri Anil Salgaocar at any stage of the relevant period i.e. from 2004 till 01.01.2016 was a person, who was resident outside India. Another argument taken by the Appellant is that she has been resident outside India. There is no ambiguity in the fact that Smt. Lakshm....