TaxTMI 
TaxTMI 
2026 (10) TMI 477
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....cement Directorate, Jalandhar from the Senior Superintendent of Police, Khanna, Jalandhar (Punjab) that they have apprehended one Sh. Girish Roy and seized Rs. 15,00,000/- and Rs. 1,50,000/- which was meant for compensatory payments. On receipt of the information, the officers of the Enforcement Directorate, Jallandhar searched the residential premises of the said Sh. Girish Rai and seized foreign exchange instruments expressed in Indian currency and foreign currency to the tune of Rs. 3,00,000/-, US $1000 and Indian currency of Rs. 4,50,000/- and some documents. The statement of Sh. Girish Rai was recorded under Section 40 of the FERA on 13.06.1996, wherein he admitted that he was engaged in the business of receiving and making payments in India under the instructions of one Sh. Subhash of Philippines for the last four months and, in the said business, he had received different payments to the tune of Rs. 28,00,000/- and made payments so far totaling to Rs. 8,50,000/- under the instructions of said Sh. Subhash of Philippines. He also stated that the foreign exchange instruments seized from him were handed over to him by his uncle during April, 1996, while the Indian currency seize....
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....ky Pukhraj and delivered the payment at the residence of Yogesh Sohal to Sh.Girish Rai. Though I agree with Sh. Puri, Advocate that the person apprehended in Punjab from whom Indian rupees were found, named Subhash of Philippines and Sh. Vijay Chand Baid has no brother named Subhash nor any person known residing in Philippines, yet I am convinced that Sh. Vijay Chand Baid has delivered the payment of Sh. Girish Rai, since the main offender in this case is Sh. Girish and Sh. Vijay Chand Baid has played a role of only mediator, I am fully convinced that he has contravened the provisions of the power conferred upon me I impose a penalty of Rs. 5,00,000/- on Sh. Vijay Chand Baid." 6. The said order was challenged by the respondent by way of an appeal before the learned Tribunal, which, as noted hereinabove, has been partially allowed by the learned Tribunal. 7. As far as the violation of Section 9(1)(b) and 9(1)(d) of FERA is concerned, the learned Tribunal upheld the order passed by the Adjudicating Authority, however, on the quantum of penalty, finding the same to be disproportionate, reduced it from Rs. 5,00,000/- to Rs. 15,000/-. We quote from the findings of the lea....
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....tatement made by him and the co-accused. He submits that the respondent is not a man of means and the learned Tribunal had rightly found that there was no mens rea in the respondent to contravene the above provisions of the FERA. He submits that there was also no evidence of the appellant having gained any extraneous consideration in the transaction. He submits that the learned Tribunal, therefore, rightly reduced the penalty imposed on the respondent. 10. He further submits that the respondent has been pursuing this appeal right since 2003, and therefore, the impugned order does not warrant any interference of this Court. 11. We have considered the submissions made by the learned counsels for the parties. 12. The question of law that requires our consideration in the present appeal is whether the learned Tribunal can interfere with the penalty imposed by the Adjudicating Authority merely on the finding that there was no mens rea in the respondent violating the provisions of the FERA, and whether the learned Tribunal erred in reducing the penalty upon finding the same to be disproportionate to the contravention involved. 13. As far as the law on disproportionality of a ....
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....ns of Section 9(1)(b) and 9(1)(d) of the FERA. There is no challenge by the respondent to these findings and the same has, therefore, attained finality. The contravention amount is of Rs. 19,50,000/-. The learned Tribunal in the impugned order has reduced the penalty only on the ground that it did not find any criminal intent or guilty mind of the respondent and that he was working without any compensation. In our mind, both these factors are wrongly applied by the learned Tribunal. 17. In Chairman, SEBI (supra), the Supreme Court while considering whether mens rea is an essential condition for imposing penalty for breach of civil obligations, held as under: "Mens rea: Whether an essential element for imposing penalty for breach of civil obligations? 33. This Court in a catena of decisions has held that mens rea is not an essential element for imposing penalty for breach of civil obligations: (a) a Director of Enforcement v. MCTM Corpn. (P) Ltd. : (SCC pp. 478 & 480-81, paras 8 & 12-13) "8. It is thus the breach of a 'civil obligation' which attracts 'penalty' under Section 23(1)(a), FERA, 1947 and a finding that the delinquent has contravened....
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....hy conduct' in the adjudicatory proceedings is established by proof only of the breach of a civil obligation under the Act, for which the defaulter is obliged to make amends by payment of the penalty imposed under Section 23(1)(a) of the Act irrespective of the fact whether he committed the breach with or without any guilty intention." (b) J.K. Industries Ltd. v. Chief Inspector of Factories and Boilers: (SCC p. 692, para 42) "42. The offences under the Act are not a part of general penal law but arise from the breach of a duty provided in a special beneficial social defence legislation, which creates absolute or strict liability without proof of any mens rea. The offences are strict statutory offences for which establishment of mens rea is not an essential ingredient. The omission or commission of the statutory breach is itself the offence. Similar type of offences based on the principle of strict liability, which means liability without fault or mens rea, exist in many statutes relating to economic crimes as well as in laws concerning the industry, food adulteration, prevention of pollution, etc. in India and abroad. 'Absolute offences' are not criminal offences....
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....he penalty. In this connection the terms in which the penalty falls to be measured is significant. Unless there is something in the language of the statute indicating the need to establish the element of mens rea it is generally sufficient to prove that a default in complying with the statute has occurred. In our opinion, there is nothing in Section 271(1)(a) which requires that mens rea must be proved before penalty can be levied under that provision." (e) Swedish Match AB v. SEBI : (SCC p. 671, para 113) "The provisions of Section 15-H of the Act mandate that a penalty of rupees twenty-five crores may be imposed. The Board does not have any discretion in the matter and, thus, the adjudication proceeding is a mere formality. Imposition of penalty upon the appellant would, thus, be a forgone conclusion. Only in the criminal proceedings initiated against the appellants, existence of mens rea on the part of the appellants will come up for consideration." (f) SEBI v. Cabot International Capital Corpn.: (Comp Cas pp. 862 & 864-65, paras 47, 52 & 54) "47. Thus, the following extracted principles are summarised: (A) Mens rea is an essential or....