Assistant Director E.D. Vs Sanjiv Lamba (Appellate Tribunal Under SAFEMA Delhi)
FEMA penalties upheld: Long-held foreign bank account & overseas loan under LRS attract sanction; Foreign Bank Account & Overseas Loan Without RBI Nod Attract FEMA Penalty: SAFEMA Tribunal Upholds ₹92.5 Lakh Penalty
The Appellate Tribunal under SAFEMA, New Delhi in Shri Sanjiv Lamba vs. Assistant Director, Directorate of Enforcement, Delhi (cross appeals FPA-FE-10/DLI/2024 & FPA-FE-11/DLI/2024, final order dated 10-12-2025) dismissed both the assessee’s as well as ED’s appeals and upheld penalties aggregating to ₹92.50 lakh imposed under the Foreign Exchange Management Act, 1999 (FEMA).
The case arose out of three alleged contraventions. Contravention-I relating to overseas share investment under LRS was rightly dropped by the Adjudicating Authority, as the remittance and investment were within the permissible RBI limits and did not require prior approval. This finding was affirmed by the Tribunal.
With respect to Contravention-II, the Tribunal upheld the penalty of ₹88 lakh for maintaining and operating a foreign bank account with HSBC, Geneva from 2000–2012 without RBI approval, in violation of section 4 of FEMA. Though the assessee argued that the foreign funds were voluntarily repatriated in 2012–13 and fully disclosed before the Income-tax Settlement Commission, the Tribunal held that subsequent repatriation and tax compliance do not wipe out a long-standing FEMA contravention, especially when the foreign assets were held abroad for more than a decade. The penalty, being around 10% of the contravened amount, was held to be proportionate and reasonable.
As regards Contravention-III, the Tribunal sustained the penalty of ₹4.5 lakh for lending foreign exchange to an overseas company (Kalobri Investment Ltd., BVI) without RBI approval, holding that LRS does not permit resident individuals to grant foreign-currency loans to foreign entities. The plea that such lending was covered under section 6(2) of FEMA and Permissible Capital Account Transactions Regulations was rejected, and the Tribunal clarified that Regulation 3 of the FEMA Borrowing or Lending Regulations squarely prohibits such loans without RBI sanction.
The Tribunal further observed that FEMA is a civil regulatory statute based on strict liability, and absence of mens rea, bona fide belief, or later compliance cannot absolve the assessee of established violations. Since ED had not sought enhancement of penalty, and penalties were already reasoned and proportionate, no interference was warranted.
FULL TEXT OF THE JUDGMENT APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI
