- Shukla Forex Pvt. Ltd. Vs Joint Director (Appellate Tribunal under SAFEMA, New Delhi)
- Background of the proceedings
- Third-party documents insufficient to establish charge
- Foreign transfer charge of Rs. 43.45 lakh upheld
- Unauthorised currency purchases and confiscation sustained
- Two directors exonerated
- Penalties substantially reduced
- Issue no.1
- Issue no.2
- Issue no.3
- Issue no.4
- Conclusion:
Shukla Forex Pvt. Ltd. Vs Joint Director (Appellate Tribunal under SAFEMA, New Delhi)
Third-Party Loose Sheets Fail to Prove Rs. 4.08 Crore FEMA Charge; Tribunal Reduces Penalties
Summary: The Appellate Tribunal under SAFEMA at New Delhi rejected a FEMA contravention allegation involving Rs. 4.08 crore against Shukla Forex Pvt. Ltd. and its Managing Director, finding that third-party loose sheets and an uncorroborated statement were insufficient to establish the charge. However, it upheld separate contraventions involving foreign transfers and unauthorised foreign currency purchases. Two other directors were exonerated because their involvement in managing the company or the contraventions was not established.
The decision was delivered on October 8, 2026, in M/s. Shukla Forex Pvt. Ltd. & Others v. Joint Director, Directorate of Enforcement, Jalandhar, Appeal Nos. FPA-FE-71 to 74/JL/2015. The Bench comprised Members Shri Balesh Kumar and Shri Rajesh Malhotra.
Background of the proceedings
The appeals challenged an adjudication order dated September 21, 2015, imposing penalties under the Foreign Exchange Management Act, 1999 (FEMA).
The Enforcement Directorate’s investigation followed searches at the premises of persons allegedly engaged in hawala transactions. Documents recovered from Jeevan Kumar alias Happy contained entries referring to “Shukla”.
ED linked those entries to Mohinder Pal Shukla, Managing Director of Shukla Forex Pvt. Ltd., an RBI-licensed money-changing business. Searches were subsequently conducted at the appellants’ premises on December 3, 2013.
The allegations under Section 3(d) involved transactions totalling Rs. 4,51,46,775. Of this, Rs. 4,08,01,515 was calculated using documents recovered from Jeevan Kumar’s premises, while Rs. 43,45,260 related to documents recovered from the appellants’ own premises.
A separate charge concerned unauthorised foreign currency purchases of Rs. 1,53,74,072.10 under Section 10(4), read with Section 42.
Third-party documents insufficient to establish charge
The appellants disputed the identification of the name “Shukla” appearing in the third-party records. They argued that the entries contained no adequate particulars linking them to Mohinder Pal Shukla.
ED relied on the seized records and statements attributed to the Managing Director acknowledging transactions through Jeevan Kumar.
Examining Section 39, which concerns presumptions relating to documents, the Tribunal observed that Jeevan Kumar was neither a co-noticee nor shown to be facing proceedings in the matter. It held that the loose sheets recovered from his premises could not be relied upon through that provision to impose penalties on the appellants for the alleged Rs. 4,08,01,515 contravention.
The Tribunal also found that the surname alone, without an address or other identifying details, did not establish that the entries referred to the appellant.
It concluded that the Managing Director’s solitary statement, without corroborative evidence, was insufficient to establish the alleged transactions. Accordingly, the charge concerning Rs. 4,08,01,515 was not sustained.
Foreign transfer charge of Rs. 43.45 lakh upheld
The Tribunal reached a different conclusion concerning entries recovered from the appellants’ own business premises.
These documents reflected telegraphic transfers involving foreign bank accounts during September and November 2013, aggregating to Rs. 43,45,260.
The appellants claimed that customers had merely been referred to HDFC Bank and that commission was received when transactions materialised. However, they produced no supporting documents correlating the seized entries with transfers processed through the bank.
The Tribunal held that a general explanation about referrals could not rebut the specific records. It therefore upheld the contravention under Section 3(d), read with Section 42, against the company and its Managing Director.
Unauthorised currency purchases and confiscation sustained
ED also identified discrepancies between seized transaction records, reported purchases and the foreign currency stock found during the search.
The Tribunal noted that the appellants failed to demonstrate any error in ED’s calculations through documentary evidence. It upheld the finding of unauthorised purchases totalling Rs. 1,53,74,072.10 under Section 10(4), read with Section 42.
Confiscation of the foreign currency actually seized, valued at Rs. 28,43,322, was also confirmed.
Two directors exonerated
Amit Shukla and Raman Bala challenged their liability, submitting that they did not manage the company’s day-to-day affairs.
The Tribunal found that ED had not controverted their claimed lack of involvement. It also failed to prove that the contraventions occurred with their consent or connivance, or were attributable to their neglect.
The Bench held that their positions were nominal and that the business was actively managed by Mohinder Pal Shukla. Both directors were consequently exonerated under Sections 3(d) and 10(4), read with Section 42.
Penalties substantially reduced
Considering the reduced quantum of the Section 3(d) contravention and the confirmed confiscation, the Tribunal reduced the company’s penalties to Rs. 4.50 lakh under Section 3(d) and Rs. 3 lakh under Section 10(4).
The Managing Director’s penalties were reduced to Rs. 1 lakh under each provision, read with Section 42.
The company’s and Managing Director’s appeals were partly allowed, while the other two directors’ appeals were allowed. Any pre-deposit was directed to be adjusted against the reduced penalties.
FULL TEXT OF THE JUDGMENT APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI
Present bunch of appeals are filed by the Appellants u/s 19 of the Foreign Exchange Management Act, 1999 and under the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000, against the Adjudication Order dated 21.09.2015 passed by the Joint Director, Directorate of Enforcement, in Show Cause Notice No. T- 4/06/JL/2014 dated 31.12.2014, whereby penalties were imposed on the Noticees/Appellants as under:
| S. No. | Name | Section 3(d) r.w.s.42 of FEMA, 1999 | Section 10(4) r.w.s.42 of FEMA, 1999 |
|---|---|---|---|
| 1. | Shukla Forex Pvt. Ltd. | 75,00,000 | 30,00,000 |
| 2. | Mohinder Pal Shukla | 45,00,000 | 20,00,000 |
| 3. | Amit Shukla | 10,00,000 | 5,00,000 |
| 4. | Smt. Raman Bala | 10,00,000 | 5,00,000 |
| S. No. | Name | Section 3( a ) of FEMA, 1999 | |
| 5. | Deepak Kalia | 50,000 | |
| 6. | Gopal Bhushan | 5,000 |
2. We heard the rival submissions and have also gone through the documents on record. As per allegations, appellant Mohinder Pal Shukla, Managing Director of M/s Shukla Forex Pvt. Ltd. made contravention to the extent of Rs. 4,51,46,775/-, on following two counts: –
Firstly: Shri Mohinder Pal Shukla, Managing Director of Shukla Forex Pvt. Ltd., Purani Dana Mandi Gate, Phagwara, had made payments of Rs. 4,08,01,515/- during the years 2012-13 to Sh. Jeevan Kumar @ Happy in lieu of which said Happy arranged foreign currency equivalents in abroad for Shri Mohinder Pal Shukla which was then transferred in the accounts of Exporters/Importers in India by way of Telegraphic Transfers (TTs).
Secondly: Shri Mohinder Pal Shukla, Managing Director of Shukla Forex Pvt. Ltd., Purani Dana Mandi Gate, Phagwara, had arranged TTs of following amounts, equivalent to Rs. 43,45,260/-, in foreign bank accounts of some persons during September, 2013, November, 2013 as per page no.s 35 & 36 of the loose sheets marked 1 – 69, recovered and seized from the business premises of Shri Mohinder Pal Shukla on 03.12.2013, for which he could not produce any legal documentary proof in office of ED.
Thus, as per above two allegations, Shri Mohinder Pal Shukla, Managing Director of Shukla Forex Pvt. Ltd., by entering into transactions totaling to the tune of Rs. 4,51,46,775/- (Rs. 4,08,01,515/- during the year 2012 and 2013 and Rs. 43,45,260/- during September & November 2013) with the persons in India in lieu of acquisition of foreign exchange abroad, and thereby contravened the provisions of Section 3(d) r.w.s. 42 of FEMA, 1999.
Thirdly: The foreign currencies worth Rs. 1,53,74,072.10 were seized from the possession of the appellants during search of his premises, on 03.12.2013, which were allegedly purchased during 01.11.2013 to 03.12.2013.
Thus, as per allegations by not complying with general or special directions or orders given by the Reserve Bank of India, the appellants have contravened the provisions of Section 10(4) r.w.s. 42 of FEMA, 1999.
Fourthly: The liability of appellant no.3 Amit Shukla & appellant no. 4 Smt. Raman Bala in managing the affairs of M/s Shukla Forex Pvt. Ltd. as directors to make them liable u/s 42 of FEMA,1999, for the aforementioned two contraventions. Now, we will decide the above four issues/alleged quantum of contraventions stated to be committed by appellants under section 3(d) & 10(4) of FEMA, 1999, in our discussion & findings in the following paras.
Issue no.1
3. As per impugned order, the allegation against appellant no. 2, the Managing Director of appellant no.1 qua the contravention of Section 3(d) of FEMA to the extent of Rs. 4,51,46,775/-. Section 3(d) of FEMA, 1999, is reproduced below:
“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 shall—
(a) ——-
(b) ——-
(c) ——-
(d) enter into any financial transaction in India as consideration for or in association with acquisition or creation or transfer of a right to acquire, any asset outside India by any person.”
Out of the said quantum of contravention, the contravention to the extent of Rs. 4,08,01,515/- is based on the loose sheets recovered from the premises of Jeevan @ Happy and the remaining contravention to the extent of Rs. 43,5,260/- is based on the loose sheets recovered from the premises of Mohinder Shukla.
4. First, we will analyse the contravention u/s 3(d) of FEMA to the extent of Rs. 4,08,01,515/- calculated on the basis of documents recovered from the premises of Jeevan @ Happy.
During the arguments, Ld. Counsel for the Appellants argued that M/s Shukla Forex Pvt. Ltd. is carrying on the business of selling & buying foreign exchange under the valid license issued by the RBI and the actual turnover of the Appellant Company is more than 100 Crores. The Company has been awarded many times for transparent and good business by the RBI. He pointed out that Shri Mahendra Pal Shukla is the Managing Director of the Company.
He stated that action against appellants was allegedly taken as a sequel to the search action taken on 01.02.2013, against certain persons namely Sh. Jeevan Kumar @ Happy of M/s Happy Forex P. Ltd. Jalandhar and Pratap Rai @ Laddi of M/s Chauhan Jewelers of Ludhiana, who were allegedly indulging in receipt/distribution of Hawala payments in India on the instructions of persons residing abroad on a very large scale and were also transferring funds illegally abroad and documents seized from the business premises of Jeevan Kumar @ Happy of M/s Happy Forex Pvt. Ltd. Adda Chowk Hoshiarpur Jalandhar on 01.02.2013 allegedly contained loose sheets marked B & C and of writing pad marked ‘E’. These documents contained some figures mentioned against some persons named ‘Shukla’. I.O. wrongly presumed that the ‘Shukla’ mentioned in the documents referred to in the preceding paragraph was in relation to the appellants as if there was only one ‘Shukla’ in entire Phagwara.
He further argued that the recovered loose sheets which find mention of the name ‘Shukla’ were never explained by Jeevan Kumar @ Happy of M/s Happy Forex, the person from whose premises the same were seized. He stressed that it took 10 months to the I.O. for taking action against appellants as the initial search conducted in the premises of namely Sh. Jeevan Kumar @ Happy of M/s happy Forex P. Ltd. Jalandhar and Pratap Rai @ Laddi of M/s Chauhan Jewelers on 01.02.2013, however, the search was conducted in the business & residential premises of appellants on 03.12.2013. He pointed out that as per allegation, during 2012-13 appellants made payment to Jeevan Kumar @ Happy in Indian currency in lieu of which Jeevan Kumar @ Happy arranged USD 383682 and UK sterling 11000 through telegraph transform for Exporters/ importers in India. It is also stated that appellant arranged foreign exchange worth Rs.3868265 for Exporters/Importers based in India through Jeevan Kumar @ Happy in 2012. There are other facts also which no human being can remember without seeing the record. Accordingly, he alleged that all allegation was fabricated and concocted by the officer who had written that statement by his own hand writing. He pointed out that all the subsequent statements were written by the appellant Mohinder Pal Shukla in his own hand writing. He argued that there is no explanation for the fact as to why the statement of Mohinder Pal Shukla had to be written by the officer of the department, when subsequent statements are written by Mohinder Pal in his own hand writing, therefore voluntary nature of these statements is highly questionable. He pointed out that ED failed to produce any documentary evidence to that effect, nor it was able to identify the person for whom the money was arranged. He contended that the charges against appellants are on the basis of documents (Loose sheets recovered from the premises of Jeevan Kumar @ Happy of M/s Happy Forex and Pratap Rai @ Laddi of M/s. Chauhan Jewelers on 01.02.2013, but neither aforesaid companies or their directors/partners have been proceeded against jointly with the appellants, as such the aforesaid documents cannot be used or read against the appellants in terms of section 39 of FEMA, hence proceedings against appellant are void ab initio, qua this allegation.
5. On the other hand, Ld. Counsel for the respondent ED submitted that as per the facts of the case, on the basis of information that Sh. Jeevan Kumar @ Happy of M/s Happy Forex Pvt. Ltd., Jalandhar and Sh. Partap Rai @ Laddi of M/s Chauhan Jewellers, Ludhiana were indulging in receipts/distribution of Hawala payments in India on the instructions of persons residing abroad on a very large scale and were also transferring funds abroad illegally, their business premises were searched u/s 37 of Foreign Exchange Management Act, 1999 on 01.02.2013 and as a result of the searches, Indian currency totaling to Rs. 1,13,50,000/-, Foreign Exchange equivalent to Rs. 17,00,000/- approx., incriminating documents revealing receipt and distribution of Hawala funds in India, details of amounts transferred abroad and also details of amounts in U.S. Dollars arranged by Sh. Jeevan Kumar @ Happy for the exporters based in Punjab showing export proceeds, two computer hard disks and a laptop were seized from the premises of M/s Happy Forex Pvt. Ltd., Jalandhar. Highly incriminating documents revealing receipt and distribution of Hawala funds in India, details of amounts transferred abroad and an amount of Rs. 5,00,000/- was seized from the premises of M/s. Chauhan Jewellers, Ludhiana of Partap Rai @ Laddi, an associate of Sh. Jeevan Kumar @ Happy. After interrogation, the statements of the following person was recorded.
Sh. Partap Rai @ Laddi in his statement recorded u/s 37 of Foreign Exchange Management Act, 1999 r.w.s. 132(A) of Income Tax Act, 1961 on 01.02.2013, inter-alia, admitted that he was indulging in receipt and distribution of funds in India on instructions of persons residing abroad.
Ld. Counsel for the respondent pointed-out that thereafter, summons was issued by I.O. to Sh. Jeevan Kumar @ Happy and Partap Rai @ Laddi on various dates, but they did not appear to join investigation and explain the documents recovered & seized from their respective premises.
Ld. Counsel for the respondent ED pointed out that as per Page Nos. 10, 12, 14, 15, 28, 31, 34, 58, 71 & 73 of the bunch of loose sheets of documents marked ‘B’, page Nos. 17, 21, 24, 67 of bunch of loose sheets marked ‘C’ and page No. 5 of writing pad marked ‘E’ recovered and seized from the business premises of Jeevan Kumar @ Happy of M/s Happy Forex Pvt. Ltd., Adda Hoshiarpur Chowk, Jalandhar on 01.02.2013, following information was found written:
Bunch of loose sheets marked as ‘B’:
| Page No. 10 | Shukla 36 | 36000=00 |
| Page No. 12 | Shukla | 20000=00 |
| Page No. 14 | Shukla 31 Shukla 16 |
31000=00 |
| Page No. 15 | Shukla 13 | 13000=00 |
| Page No. 28 | Shukla Ginni Shukla to Pal Shukla | 11677=00 25000=00 23500/P |
| Page No. 31 | Shukla Ginni | 3285=00 |
| Page No. 33 | Shukla | 3868256 |
| Page No. 34 | Shukla | 20000=00 |
| Page No. 58 | Shukla | 44730=00 |
| Page No. 71 | Shukla 25 Shukla Ginni 16 |
25000=00 16000=00 |
| Page No. 73 | Shukla 11 | 11050=00 |
Bunch of loose sheets marked as ‘C’
| Page No. 17 | Shukla | 60000/_ 86/75 Bunty 86/60 |
(17/1) |
| Page No. 21 | Shukla | 44730=00 | (8/1) |
| Page No. 24 | Shukla | 11050=00 | (21/1) |
| Page No. 67 | Shukla | 930=00 | (23/12) |
Writing Pad marked as ‘E’
| Page No. 5 | To be given by Bunty | ||
| 50000/P 87/40 to Shukla | |||
| (7/1) | |||
| (17/1) | 60000/P | 86/60 to Shukla | 51960=00 |
On the basis of said documents, ED concluded that a person named Shukla of Phagwara had arranged TTs for some Exporters for amounts totaling to Rs. 4,08,01,515/- through Jeevan Kumar @ Happy of M/s Happy Forex Ltd. during the year 2012-2013.
Ld. Counsel for the respondent submitted that enquiries caused about the said ‘Shukla’ of Phagwara revealed that appellant no.2 was running Foreign Exchange Business in the name of M/s Shukla Forex Pvt. Ltd. at Old Dana Mandi Gate, Phagwara. His full name was Mohinder Pal Shukla. It was also revealed that he was indulging in the business of Hawala. His residential address was 202, Professors Colony, Phagwara.
Ld. Counsel for the respondent ED contended that after identifying the ‘Shukla’ searches were conducted at his business & residential premises and incriminating documents, foreign currency and Indian currency was also recovered. The statement of Mohinder Pal Shukla was also recorded, wherein he stated as under:-
Shri Mohinder Pal Shukla in his statement recorded on 03.12.2013 u/s 37 of Foreign Exchange Management Act, 1999 r.w.s. 132 of the Income Tax Act, 1961 inter-alia stated that he was the Managing Director of M/s Shukla Forex Pvt. Ltd.. He was having franchisee of Western Union Money Transfer and Money Gram and Money Express for money transfer. His wife, Smt. Raman Bala, his sons, Shri Amit Shukla and Rajeev Shukla were directors in the said company. Sh. Jeevan Kumar @ Happy of M/s Happy Forex Pvt. Ltd. was known to him for the last 3 years. During 2012 & 2013, he made payments to Shri Jeevan Kumar @ Happy in Indian Currency in lieu of which he (Happy), arranged TTs amounting to USD 383682 and GBP 110000 for the Exporters/Importers based in India. He did not remember the details of such Exporters/Importers. As far as he rememberd, in the year 2012, he arranged foreign currency equivalent to Indian Rs. 38,68,265/- for the Exporters/Importers based in India through said Jeevan Kumar @ Happy. Out of the aforesaid foreign exchange made available in US Dollar by Jeevan Kumar @ Happy, TTs of USD 35282 was arranged for a person named Ginni of Jalandhar, who was involved in business of Money Exchange in Jalandhar.
Shri Mohinder Pal Shukla in his statement recorded on 25.11.2014 u/s 37 of Income Tax Act, 1961 inter alia stated that he was the Managing Director of M/s Shukla Forex Pvt. Ltd., which was a licensed FFMC. He was having franchise of Western Union Money Transfer, Money Gram, Instant Cash and Money Express for money transfer and his wife, Smt. Raman Bala and his son, Amit Shukla were Directors in the said company and annual turnover of his money exchange business was of Rs. 100 Crores approx. He was shown the copies of documents, page Nos. 12, 14, 15, 28, 31, 33, 34, 58, 71 & 73 of bunch of loose sheets marked ‘B’, page No. 5 of loose sheets marked ‘E’ and page Nos. 17, 21, 24 & 67 of loose sheets marked ‘C’ recovered & seized from the business premises of Jeevan Kumar @ Happy of M/s. Happy Forex Pvt. Ltd., Adda Hoshiarpur Chowk, Jalandhar during search on 01.02.2013 and was asked to explain the payment details reflecting in his name in the above said documents. He put his dated signature on the copies of aforesaid documents in token of having seen the same and replied that as per the pages of loose sheets of Bunch marked ‘B’ shown to him and relating to him, he had made payments totaling to Rs. 3,11,01,515/- in cash to Jeevan Kumar @ Happy and as per the copies of documents shown to him as whole, he had made payments totaling to Rs. 4,08,01,515/- on the dates as reflecting in the documents shown to him in lieu of which, Jeevan Kumar @ Happy had made available TTs in foreign exchange to the Exporters/Importers in India during 2012-13. He further stated that he was unable to recall the details thereon. Ld. Counsel for respondent ED submitted that it is on the record that Appellant no. 2 during the course of the statement on 03.12.2013, and also during subsequent statements recorded on 25.11.2014, when confronted with documents recovered and seized from the business premises of Jeevan Kumar @ Happy had admitted that the documents contained his name ‘Shukla’ and as per those documents, he made payments totaling to Rs. 4,08,01,515/- in India in lieu of arranging TTs in foreign exchange for Importers/Exporters. Further, it is on the record that vide his letter dated 04.12.2013, appellant Mohinder Shukla had retracted his statement made on 03.12.2013 and it was considered and replied to vide letter dated 01.01.2014. However, he did not make any retraction after his statement on 25.11.2014, wherein he reiterated the facts stated by him in his earlier statement dated 03.12.2013, thus, rendering the retraction futile.
6. On the basis of above rival contentions, we considered the same. There are rough calculations done by the officers based on the loose sheets found from the premises of Sh. Jeevan Kumar @ Happy, in assessing the unauthorized amount for sum of Rs. 4,08,01,515/- alleged to be changed by appellant no.1. Therefore, the issue arises as to whether the said amount can be considered for assessing the amount of contravention against the appellants. The relevant Section pertaining to presumption of documents is Section 39 of FEMA, which is reproduced below:
“39. Presumption as to documents in certain cases.— Where any document—
(i) is produced or furnished by any person or has been seized from the custody or control of any person, in either case, under this Act or under any other law; or
(ii) has been received from any place outside India (duly authenticated by such authority or person and in such manner as may be prescribed) in the course of investigation of any contravention under this Act alleged to have been committed by any person, and such document is tendered in any proceeding under this Act in evidence against him, or against him and any other person who is proceeded against jointly with him, the court or the Adjudicating Authority, as the case may be, shall—
(a) presume, unless the contrary is proved, that the signature and every other part of such document which purports to be in the handwriting of any particular person or which the court may reasonably assume to have been signed by, or to be in the handwriting of, any particular person, is in that person’s handwriting, and in the case of a document executed or attested, that it was executed or attested by the person by whom it purports to have been so executed or attested;
(b) admit the document in evidence notwithstanding that it is not duly stamped, if such document is otherwise admissible in evidence;
(c) in a case falling under clause (i), also presume, unless the contrary is proved, the truth of the contents of such document.”
Thus, as per second part of Section 39 of FEMA, the loose sheets recovered from premises of Jeevan Ram @ Happy and the amount of contravention calculated on the basis of those sheets to the extent of Rs. 4,08,01,515/- cannot be taken into consideration for imposition of penalty against the appellants, as Sh. Jeevan Ram @ Happy is neither a co-noticee, nor any proceedings are stated to be initiated against him, till date. Further, we are of the view that merely the name “Shukla” (without any address or other details) mentioned in the loose sheets recovered from the premises of Jeevan Ram @ Happy does not give any presumption as to the fact that the same belongs to the appellant no. 2, Mohinder Shukla, as there may be large number of Shuklas in various districts of Punjab. Thus, we are of the considered view that the solitary statement of the appellant Mohinder Pal Shukla in absence of any corroborative evidence cannot be considered to arrive at conclusion that he purchased foreign currency to the extent Rs.4,08,01,515/- from Jeevan @ Happy to arrange foreign currency equivalents in the accounts of Exporters/Importers in India by way of Telegraphic Transfers (TTs). Therefore, the charge w.r.t. the value of Rs. 4,08,01,515/- cannot be substantiated and the penalty cannot be imposed on this value.
Issue no.1 is accordingly decided in favour of appellants.
Issue no.2
7. Now, we will analyse the contravention u/s 3(d) of FEMA to the extent of Rs. 43,45,260/-, calculated on the basis of documents recovered from the premises of Shukla Forex Pvt. Ltd.. As per allegations, Shri Mohinder Pal Shukla, Managing Director of Shukla Forex Pvt. Ltd., had arranged TTs of the foreign currency amounts, equivalent to Rs. 43,45,260/-, in foreign bank accounts of some persons during September, 2013, and November, 2013 as per page no.s 35 & 36 of the loose sheets marked 1 – 69, recovered and seized from the business premises of Shri Mohinder Pal Shukla on 03.12.2013, for which he could not produce any legal documentary proof in the office of ED and thereby, held liable for the contravention the provisions of Section 3(d) of FEMA. The details of the said recovered sheets are as under:-
Page No.35 Mobile No. 7318314677, Ankit 8070 means he made available TT of GBP 8070 in bank account of Ankit in England. Likewise, Mobile Numbers 7983872782 & 7574543952 means that he made available TT of GBP 5775 in the account of a relative of the person using aforesaid mobile numbers maintained with TSB Llyod Bank, England. TT of GBP 5000 was made available to the bank account of relative of person using mobile No. 7772673869. All the TTs were done in November 2013 @ Rs. 102/GBP
Page No.36 As per this page, he made available TTs of NZD 13070, NZD 2000, GBP 5775 and GBP 5000 in foreign bank accounts for Minhas, Parashar and Laddu in September, 2013. At that time, rates of NZD and GBP were Rs.51 and Rs. 100 respectively.
8. On the other hand, Ld. Counsel for the appellants submitted that in respect of charge of Rs. 43,45,260/- the appellants had not contravened the provisions of Section 3(d) as they referred the persons to HDFC Bank Ltd. in all cases and on materialization of transaction, the bank paid them their commission.
9. We find from the record that the appellants had not given any documentary/supporting evidence either during the course of investigation or adjudication proceedings clearly specifying that the TTs reflected in the seized documents to the tune of Rs. 43,45,260/- had been transacted through bank by them. Merely stating that the said TTs were transacted through HDFC bank and they got the commission, without any documentary evidence will not mitigate the charge. Further the contention of appellants that their business depends upon the references received & made and that they used to call people in general routine is very generalized one and being FFMC it is enjoined upon them to maintain proper record of TTs which have been affected by them and correlate it with the TTs reflected in the seized documents.
Thus, we are of the considered view that appellant no. 1 & 2 had dealt with the persons in India in lieu of acquisition of foreign exchange abroad to the tune of Rs. 43,45,260/- during September & November 2013), and hence contravened the provisions of Section 3(d) r.w.s. 42 of FEMA, 1999. Issue no.2 is accordingly decided against the appellant no.1 & 2.
Issue no.3
10. As per the case of the ED, the foreign currencies worth Rs. 1,53,74,072.10 were seized from the possession of the appellants during search of Business premises, on 03.12.2013, which were allegedly purchased during 01.11.2013 to 03.12.2013, without reflecting in the records and thus, they are stated to be liable for the contravention of Section 10(4) r/w Section 42 of FEMA.
The above allegation is based on the statement of Shri Mohinder Pal Shukla recorded by ED on 01.12.2014 and he was shown the copies of documents Page No. 1-69 recovered and seized on 03.12.2013 during search of his business premises i.e. M/s Shukla Forex Pvt. Ltd., and was asked to explain the said documents. Shri Shukla explained the documents as under:
Page No. 1 On this page, detail of purchase of foreign currency equivalent to Rs. 1,45,145/-, purchased on 30.11.2013 from M.C. Minhas of Minhas Money Changer, Gill Chowk, Ludhiana was written.
Page No. 2 On this page, details of purchase of GBP 6000 @ Rs. 100.30/ pound purchased from one Ginni of Jalandhar who was having business of Money Changer in Jalandhar was written. He did not remember full name and address of said Ginni.
Page No. 3 On this page, details of purchase of foreign currencies, CAD 5660 @ Rs. 63.30, GBP 3000 @ Rs. 99 from one Shiv of Goyal Money Changer, Chaddha Market, Phagwara were mentioned. The amounts of Rs. 2,94,403/- & 1,37,500/- written on this page were related to the same transaction. The aforesaid foreign currencies were purchased in November, 2013.
Page No.4 180/3 written on this means that he had purchased GBP 180 from one Pintu on 29.11.2013. Apart from this, some more foreign currencies were purchased from that Pintu, the total price of which was Rs. 1,01,480/-. He further stated that he used to use numeric codes for foreign currencies like:
1 = USD
2 = CAD
3 = GBP
4 = EURO
5 = Dirham
Page No.5 As per this page, he had purchased USD 9000 from one Kanda and USD 3000 from one Manoj Happy in November 2013, Rs. 65/Dollar. He did not remember the details of said Kanda & Manoj Happy. He had also purchased GBP equivalent to Rs. 1,97,300/- in November 2013 from one Sethi Money Changer of Amritsar. He did not remember the address of said Sethi.
Page No.6 On this page, details of transaction of Rs. 1,60,800/- & Rs. 1,02,800/- with one Pathak and his son, Rajeev on 25.11.2013 were written, he did not remember the details of this transaction, the full name of Pathak was Pappu Pathak and he was engaged in the business of property dealing near Basia Palace, Banga Road, Phagwara.
Page No. 7 As per this page he had sold foreign currencies, in the bank in November 2013, as detailed below:-
1. Omani Riyal 1070 @ Rs. 160.50
2. USD 138 @ Rs. 62.21
3. UAE Dirham 965 @ Rs. 17, UAE Dirham 4030 @ Rs. 16.91 Likewise, the rest of foreign currencies mentioned on the page were sold to the bank. SAR means Saudi Riyal, Q means Qatar Riyal, B means Bahrin Dinar, SF means Swiss Frank, E means Euro, 3 means GBP and N means was New Zealand Dollar.
Page No.8 As per this page, GBP 7300 @ Rs. 101.50 was purchased from one Pappu, who was having FFMC in the name of Beauty Center, in Ghummar Mandi in November, 2013.
Page No.9 As per this page, in November 2013, GBP 2000 @ Rs. 99.80 and GBP 10000 @ Rs. 101 were purchased from one Gandhi who was money changer of Hoshiarpur
Page No.10 On this page, the details of payment of Rs. 24,000/- and code of Western Union Money Transfer was mentioned.
Page No.11 On this page, details of foreign currencies, CAD 50000, AUD 30, EURO 30000, NZD 13000 and Dirham 20000 surrendered to the Capital Local Area Bank, Phagwara in November 2013 were mentioned.
Page No.12 On this page, details of purchase of, USD 4450 from one Deepa, foreign currencies equivalent to Rs. 1,79,320/- from one Sethi whose name was cited earlier and details of arrangement of TT of AUD 10000 @ Rs. 57.70/ AUD for one Bobby, who was engaged in the business of Western Union Money Transfer in Kadia, Disst. Gurdaspur were written. He did not remember the details of said TT and all transactions mentioned on this page were belonged to November 2013.
Page No.13 As per this page, details of purchase of GBP 1000 @ Rs.102 in November 2013 from Vijay, who was engaged in the business of money changer in Mahilpur were written.
Page No.14 As per this page, he purchased foreign currencies totaling to Rs.1,33,43,250/- from Pappu of Ludhiana, Gandhi of Hoshiarpur and Ginni, whose name was cited earlier
Page No.15 As per this page, he purchased GBP 45470 @ 99.50 on 25.11.2013 from Pappu, Ghummar Mandi whose name was mentioned earlier by him.
In his further statement dated 02.012.2014, Shri Mohinder Pal Shukla explained the pages, 16 to 69 of documents recovered & seized on 03.12.2013 during search of his business premises, Shukla Forex Pvt. Ltd., Purani Dana Mandi, Phagwara, conducted by the Office of ED.
Page No.16 As per this page, he purchased GBP equivalent to Rs. 1,25,49,690/-and other foreign currencies equivalent to Rs. 8,88,160/- in November 2013. That the details written on the back side of this page were related to the same transaction.
Page No.17 Foreign currency as mentioned on this page was surrendered by him to Capital Local Area Bank, Phagwara in November 2013 & first two days of December 2013.
Page No.18 Accounts of Rs. 6,09,250/- related to Pathak whose name was cited earlier was mentioned on this page. He did not remember the details.
Page No.19, 20 & 21 The accounts of Rs. 53,40,000/- and Rs. 44,00,000/-written on this page were related to his foreign exchange business. He further stated that he used to withdraw Rs. 50-60 lakhs per day from banks for his business.
Page No. 22 As per this page, he purchased GBP 3920 @ 101.40 from one Trilochan Singh Tochi of Amritsar and GBP 1000 @ 101.50 from Parashar Money Changer of Nawanshahar. He further stated that Trilochan Singh @ Tochi was known to him for last two years.
Page No.23 As per this page, in November 2013, he purchased foreign currencies, USD 500, CAD 5000, MYR 1500 and SGD 3000 from a customer named Davinder.
Page No.24 On this page, details of foreign currencies purchased on 28.11.2013 were written. He further stated that, H was written for Honkong Dollar.
Page No.25 As per this page, he purchased USD 5500 @ 63 from one customer named Bharat
Page No.26 As per this page, he purchased foreign currencies equivalent to Rs. 2,69,380/- from one person named Ndana in November 2013.
Page No.27 As per this page, he purchased GBP 10000 @ 101.60 from one Davinder.
Page No.28 As per this page, he purchased GBP 27150 from Parashar, Tochi, Laddu and some other persons. Apart from this, he also purchased GBP 24830 written on right side of the page @ Rs. 100. He further stated that the GBP 27150 was purchased at different rates.
Page No.29 & 31 On these pages, details of purchase of GBP 19600 @ Rs. 100.25, GBP 4800 @ Rs. 100.50 and GBP 3300 @ Rs. 101.25 from Laddu in November 2013 were mentioned. He further stated that, GBP 1200 @ Rs. 100 written on this page were also cited at page No. 28. Laddu was having Foreing Exchange business in name of Goyal Money Changer at Jagrao. Laddu was also known as Cheena. Word LDO was written for Laddu.
Page No.30 As per this page, he purchased CAD 8100 @ Rs. 58.10 from one Deepak.
Page No.32 & 33 Details written on these pages, he could not recall.
Page No.34 As per this page, he purchased USD 300 and CAD 150 in October 2013.
Page No.35 Mobile No. 7318314677, Ankit 8070 means he made available TT of GBP 8070 in bank account of Ankit in England. Likewise, Mobile Numbers 7983872782 & 7574543952 means that he made available TT of GBP 5775 in the account of a relative of the person using aforesaid mobile numbers maintained with TSB Llyod Bank, England. TT of GBP 5000 was made available to the bank account of relative of person using mobile No. 7772673869. All the TTs were done in November 2013 @ Rs. 102/GBP
Page No.36 As per this page, he made available TTs of NZD 13070, NZD 2000, GBP 5775 and GBP 5000 in foreign bank accounts for Minhas, Parashar and Laddu in September, 2013. At that time, rates of NZD and GBP were Rs.51 and Rs. 100 respectively.
Page No.37 On this page, details of accounts related to Ndana and Pathak were written.
Page No.38 As per this page, he purchased AUD 600 @ Rs. 57 on 19.11.2013.
Page No.39 As per this page, he purchased USD 71186 from Bobby of Kadian and Dollar 46075 from Minhas, Laddu, Ginni etc. in September, 2013. The rate of Dollar was Rs. 60 that time.
Page No.40 As per this page, he purchased GBP 60840 @ Rs. 100 in October, 2013 from different money changers.
Page No.41 As per this page, he purchased foreign currencies equivalent to Rs. 22,18,140/- from Pappu of Ghummar Mandi on 03.12.2013 and GBP 8050 @ Rs. 99.50 was also purchased from one Shiv.
Page No.42 The accounts written on this page were related to Luck Sood of Phagwara who was engaged in Share Market activites.
Page No.43 that he did not remember the accounts of Rs. 29,80,000/- and Rs. 24,50,000/- written on this page. Also, this slip was not written in his handwriting
Page No.44 The MBAL written on this page was out of his knowledge.
Page No.45 & 46 On these pages, the details of foreign currencies purchased from several persons in December 2013 were written as Pala E/500 84/25 means he purchased EURO 500 @ Rs. 84.25 from a person named Pala who was having a cloth house in Chabbewal, Hoshiarpur. Kalia was a Jeweller in Panchhtan and Khosla was doing foreign exchange business in Phillaur. He further stated that the transactions mentioned on these pages which were cut off, denoted the cancelled deals.
Page No.47 The mobile numbers and foreign currencies mentioned on this page were related to the prospective sellers of foreign currencies. He used to purchase foreign currencies from such persons after fixing the rate over given mobile number. He did not remember the details of foreign currencies purchased by him in this way
Page No.48 On this page, details of TT done by him in account No. 1016476 with Royal Bank of Canada in October, 2013 was given.
Page No.49 & 50 On these pages, stock of foreign currencies was mentioned.
Page No.51 to 64 These pages were the receipts of foreign currencies purchased by Shukla Forex Pvt. Ltd. on 03.12.2013.
Page No.65 This page was related to the payment of Rs. 54,730/- made to Navneet Kaliya through Western Union.
Page No.66 to 68 These pages were the receipts of sale of 540 Dollar and the foreign currencies surrendered to the Capital Local Area Bank.
Page No.69 As per this page, he purchased foreign currencies equivalent to Rs. 8,77,075/- and Rs. 4,12,660/- in October 2013. On the basis of above material, Show Cause Notice was also issued to the appellants for the contravention to the extent of Rs.1,53,74,072.10 under Section 10(4) of the FEMA,1999.
11. Ld. Counsel for the appellants contended that the foreign currencies purchased by him on 03.12.2013 were seized by the Enforcement Department during search of his business premises, Shukla Forex Pvt. Ltd. on 03.12.2013. He did not purchase any other foreign currency on that day after the search. The Indian currency of Rs. 23,00,000/- recovered and seized from his business premises on same day was accounted for in the book of accounts of his company and the same was rightly released by the Adjudicating Authority. The foreign currencies recovered and seized were purchased from different customers between 01.12.2013 to 03.12.2013 and not in the month of November 2013, as alleged. No director of his company was maintaining any foreign bank account. Ld. Counsel for the appellants submitted that the statement dated 03.12.2013 is false and fabricated and not written by him. Appellant has not stated any self-incriminating fact to the I.O. of ED. He further pointed out that the appellant has already retracted the said statement and hence, the previous statement needs to be discarded. He argued that the second self-incriminating statement was written by the appellant under force, pressure, and threat and hence, the same is inadmissible and need to be discarded. He further argued that the recovery of foreign currency from his business premises s duly reflected in his monthly and daily statement (FLM-8 & FLM-1) filed before the RBI. RBI did not notice any such irregularity. Hence, the appellants have not made any contravention U/s. 10(4) of FEMA.
12. On the other hand, the Ld. Counsel for the respondent argued that on 03.12.2013 during search of business premises of Shri Mohinder Pal Shukla, M/s Shukla Forex Pvt, Ltd. the record of the said company was seized. The statement of Shri Mohinder Pal Shukla was also recorded on the day of search and later, on 25.11.2014, 01.12.2014, 02.12.2014 & 29.12.2014 recorded in the office of ED, u/s 37 of FEMA, 1999 r/w Section 131 of Income Tax Act, 1961, wherein as per record, the Foreign Exchange purchased & sold by the said FFMC during November 2013 and on 03.12.2013 was detailed below in Table A & B respectively.
Table A: Details of F.C. purchased & sold in the month of November 2013 as per seized documents and statements of Shri Mohinder Pal Shukla
| S. No. | F.C. | Total Purchase during the month | Related page No./s of the seized documents | Total Sale during the month | Related page No./s of the seized documents |
|---|---|---|---|---|---|
| 1. | AED | 0 | – | 44995 | 7, 11, 17 |
| 2. | AUD | 600 | 38 | 30030 | 11, 17 |
| 3. | BHD | 0 | – | 5 | 7 |
| 4. | CAD | 20340 | 3,23,30 | 100000 | 11, 17 |
| 5. | EUR | 0 | – | 60655 | 7, 11, 17 |
| 6. | MYR | 6210 | 23,24 | 0 | – |
| 7. | NZD | 0 | – | 26370 | 7, 11, 17 |
| 8. | OMR | 0 | – | 107 | 7 |
| 9. | QTR | 0 | – | 2200 | 7 |
| 10. | SAR | 0 | – | 2250 | 7 |
| 11. | SGD | 7163 | 23, 24 | 0 | – |
| 12. | GBP | 404793 | 2, 3, 4, 5, 8, 9,13, 14, 15, 16,22, 27, 28, 29,31 | 1760 | 7 |
| 13. | CJF | 0 | – | 50 | 7 |
| 14. | THB | 30000 | 24 | 0 | – |
| 15. | USD | 22450 | 5, 12, 23, 25 | 138 | 7 |
| 16. | CNY | 300 | 24 | 0 | – |
| 17. | HKD | 100 | 24 | 0 | – |
Mohinder Pal Shukla
| S. No. | F.C. | Closing stock as per FLM 1 dated 02.12.2013 | Total purchase as on the day | Related page No./s of the seized documents | Total sale as on the day | Related Page No./s of the seized documents | Closing stock on 03.12.2013 |
|---|---|---|---|---|---|---|---|
| 1. | AED | 0 | 4995 | 51, 52, 62 | 4995 | 66 | 0 |
| 2. | BHD | 0 | 5 | 61 | 5 | 66 | 0 |
| 3. | EUR | 1500 | 650 | 64 | 655 | 66 | 1495 |
| 4. | NZD | 0 | 370 | 61 | 370 | 66 | 0 |
| 5. | OMR | 0 | 107 | 60 | 107 | 66 | 0 |
| 6. | SAR | 2000 | 250 | 59 | 2250 | 66 | 0 |
| 7. | GBP | 0 | 1760 | 53, 54, 55,58, 63 | 1760 | 66 | 0 |
| 8. | CHF | 0 | 50 | 57 | 50 | 66 | 0 |
| 9. | USD | 0 | 138 | 56 | 1178 | 66 | 1040 |
| 10. | CAD | 860 | 0 | – | 0 | – | 860 |
| 11. | QTR | 2200 | 0 | – | 0 | 66 | 2200 |
| 12. | AUD | 0 | 0 | – | 0 | – | 0 |
Further, the details of foreign currencies recovered and seized from the business premises of Shri Mohinder Pal Shukla was as detailed in Table C below:
Table C: Details of F.C. recovered & seized on 03.12.2013 from the business premises of Shri Mohinder Pal Shukla
| S. No. | F.C. | Seized during search |
|---|---|---|
| 1. | AUD | 4190 |
| 2. | EUR | 13000 |
| 3. | NZD | 2020 |
| 4. | GBP | 3565 |
| 5. | CAD | 14145 |
| 6. | USD | 3150 |
| Total Value in INR | 28,43,322 |
However, as per copy of FLM 8 for the month of November 2013 as submitted by Shri Mohinder Pal Shukla in the office of ED, details of Foreign Exchange purchased and sold during the month were detailed below:
Table D: Details of F.C. purchased & sold in the month of November 2013 as per FLM 8
| S. No. | F.C. | Purchased | Sold |
|---|---|---|---|
| 1. | AED | 163020 | 163020 |
| 2. | AUD | 59160 | 59160 |
| 3. | BHD | 697 | 697 |
| 4. | CAD | 182580 | 181840 |
| 5. | DKR | 83100 | 83100 |
| 6. | EUR | 116880 | 119880 |
| 7. | KWD | 840 | 840 |
| 8. | MYR | 322 | 322 |
| 9. | NDZ | 50590 | 50590 |
| 10. | NOK | 19200 | 19200 |
| 11. | OMR | 2185 | 2185 |
| 12. | QTR | 19337 | 19337 |
| 13. | SAR | 55625 | 55625 |
| 14. | SCP | 217 | 217 |
| 15. | SGD | 953 | 953 |
| 16. | GBP | 283950 | 283950 |
| 17. | SEK | 16500 | 16500 |
| 18. | CHF | 100 | 100 |
| 19. | THB | 220 | 220 |
| 20. | USD | 209011 | 209011 |
| Total Value in INR | 7,43,03,486 | 7,47,78,260 |
Comparing the details as mentioned in Table A & Table D, it was concluded by ED that units of some foreign currencies actually purchased by the FFMC in the month of November 2013 were less declared in FLM 8 for the same month submitted to RBI. Differences of actual and declared values of foreign currencies purchased in November 2013 is detailed in Table E below:
Table E: Difference of actual and declared values of F.C. purchased in the month of November 2013
| S. No. | F.C. | Difference of actual & declared purchased | Exchange rate of the currency prevalent during the month in INR | Value in Indian Currency |
|---|---|---|---|---|
| 1. | MYR | 5888 | 19.50 | 1,14,816.00 |
| 2. | SGD | 6210 | 50 | 3,10,500.00 |
| 3. | GBP | 120843 | 10 | 1,22,05,143.00 |
| 4. | THB | 29780 | 2.86 | 79,180.00 |
| Total Value | 1,27,09,639.00 |
Further, on comparing the details as mentioned in Table B & Table C above, it was concluded by IO that there was difference between the amounts of foreign currencies in stock on 03.12.2013 and those recovered & seized during the course of search, which is reflected in the Table F given below:
| S. No. | F.C. | Closing stock on 03.12.2013 | Seized during search on 03.12.2013 | Difference | Exchange rate prevalent during the month in INR | Value in Indian Currency (Rs.) |
|---|---|---|---|---|---|---|
| 1. | EUR | 1495 | 13000 | 11505 | 85.10 | 9,79,075.00 |
| 2. | NZD | 0 | 2020 | 2020 | 50.72 | 1,02,454.40 |
| 3. | GBP | 0 | 3565 | 3565 | 101.05 | 3,60,243.25 |
| 4. | USD | 1040 | 3150 | 2110 | 62.21 | 1,31,263.10 |
| 5. | CAD | 860 | 14145 | 13285 | 61.71 | 8,19,817.35 |
| 6. | QTR | 2200 | 0 | 2200 | 17 | 37,400.00 |
| 7. | AUD | 0 | 4190 | 4190 | 55.89 | 2,34,179.10 |
| Total Value = | 26,64,432.10 |
He pointed out that accordingly, the Adjudicating Authority permitted the confiscation of the foreign currency equivalent to Rs. 28,43,322/- recovered & seized during search from the business premises of Shri Mohinder Pal Shukla.
13. After hearing the rival submissions of both the parties, we reproduce the Section 10(4) of FEMA, 1999 herein below:
“10. Authorised person.—
———————-
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.
—————–”
We are of the view that while replying with regard to the currencies recovered & seized during the course of the search of the M/s Shukla Forex Pvt. Ltd. as detailed in Table-F mentioned in the complaint, the Ld. counsel for appellant has made submissions that the difference in foreign currencies were due to the reason that currencies were purchased after the search was concluded by the department which resulted in increase in closing stock and duly reflected in FLM-1 for 03.12.2013. We find from record that the search of the business premises of M/s Shukla Forex Pvt. Ltd. commenced on 03.12.2013 at 04:15 pm and was concluded as late as 08:35 pm. Thereafter, the appellant no.2, Mohinder Pal Shukla also made a statement on 03.12.2013 itself. In view of the fact above, the submission of the appellant falls highly unlikely that after the search, the customer would come with foreign currencies at that late hour for purpose of exchange. This is also fortified with the fact that the INR 23,00,000/- found in his business premises was already seized by the ED and thus the appellant company was not in position to purchase the foreign currency. Moreover, Mohinder Pal Shukla on 02.12.2014, stated that the record pertaining to purchases of foreign currencies made by M/s Shukla Forex Pvt. Ltd. was seized by the Officers of Enforcement Directorate and thereafter no foreign currency was purchased. Therefore, it is established beyond doubt that the appellant company being authorized dealer in Foreign Exchange had failed to comply with general or special directions of the Reserve Bank and the seized Foreign Currency was purchased in contravention the Provisions of section 10(4) read with section 42 of FEMA, 1999 as brought out in the complaint. Ld. Counsel for the appellants failed to point out any irregularity in calculations made by the ED for not reflecting the transactions to the extent of Rs. 1,53,74,072.10, as detailed in para no. 12 above, by way of any documentary evidence. However, encashment certificates seized from his premises on 03.12.2013 and stock position of the foreign currencies as brought out in complaint as well as the statement of the appellant at Sr. No. 2 that he did not purchase any Foreign Currency on that day after the search, clearly indicated that the seized foreign currencies were purchased in violation of the guidelines. The charge of the contravention of Section 10(4) read with section 42 of FEMA, 1999 as brought out in the complaint against the appellants at S.No.1 & 2 for unauthorized purchase of foreign currencies to the tune of Rs. 1,53,74,072.10 is therefore established. We are satisfied with the detailed findings qua this issue made by the Ld. Adjudicating Authority in para (b) of the findings at internal page no. 28 & 29, in absence of any contrary evidence.
Thus, this issue is decided against the appellant no. 1 & 2 and in favour of the respondent ED.
Issue no.4
14. The next issue is with regard to the liability of appellant no.3 Amit Shukla & appellant no. 4 Smt. Raman Bala in managing the affairs of M/s Shukla Forex Pvt. Ltd. as directors and the corresponding penalty imposed on them to make them liable U/s 42 of FEMA,1999 for contravention of section 3(d) & 10(4) of FEMA, 1999.
15. The Ld. counsel for the appellants submitted that Smt. Raman Bala (wife) & Amit Shukla (Son) whose statements were not recorded and who are not involved in day-to-day affairs of Shukla Forex. He stated that the other Directors namely, Smt. Raman Bala w/o Sh. Mahendra Pal Shukla and Amit Shukla S/o Mahendra Pal Shukla were not looking after the affairs of the said Company. Raman Bala is fifth class fail and is a housewife and she has no knowledge about the affairs of M/s Shukla Forex, as the affairs of the said Company were managed by her husband Mahendra Pal Shukla. Amit Shukla is tenth class fail and never looked after the day-to-day affairs of the M/s Shukla Forex and was only looking after the miscellaneous works of the company.
16. On the other hand, the Ld. Counsel for the respondent ED submitted that the appellant no. 3 & 4 are also liable for the contravention of the aforementioned provisions on account of statutory liability under Section 42 of FEMA,1999 being the directors of the company. He contended that they cannot claim any immunity from the contravention by taking the plea that they were not managing the affairs of the company.
17. We considered the rival submissions. Section 42 of FEMA is reproduced as under:
“42. Contravention by companies.—(1) Where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder is a company, every person who, at the time the contravention was committed, was in- charge of, and was responsible to, the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised due diligence to prevent such contravention.
(2) Notwithstanding anything contained in sub-section (1), 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 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.”
The respondent ED during investigation failed to controvert the fact that at the relevant time appellant no. 3 Amit Shukla was tenth class fail and Appellant no. 4, Smt. Raman Bala was a housewife & an uneducated lady, or they were not managing the affairs of M/s Shukla Forex Pvt. Ltd., as stressed by the appellants. Thus, as per proviso to Section 42(1) of FEMA, they are not liable for contravention, as alleged. Section 42(2) is also not applicable against the applicants as the respondent ED failed to prove that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, the appellants being directors. Hence, we are of the view that the charge against the appellants at S. No. 3 & 4, is not sustainable as they did not look after the affairs of the company.
Thus, the appellant no 3 & 4 are entitled to be exonerated of the charges u/s Section 3 (d) as well as Section 10(4) r/w Section 42 of FEMA, 1999, given the fact that they were holding that position for the namesake and had no active role to play in the day-to-day business activities of the said company M/s Shukla Forex, rather it was solely and actively run by the appellant no. 2 since they were not active in the management of the company. Accordingly, issue no. 4 is decided in favour of appellant no. 3 & 4 and against the respondent ED.
Conclusion:
18. From the discussions made in the para 2 to 17 above,
i) appellant No.1, made the contravention of Section 3(d) of FEMA to the extent of Rs. 43,45,260/-, but not for 4,51,46,775/- and impugned order stands modified to this extent; and Section 10(4) of FEMA to the extent of Rs.1,53,74,072.10.
ii) The confiscation of foreign currency equivalent to Rs. 28,43,322/- hereby stands confirmed.
iii) Appellant no.2 committed the said contraventions under Section 42 r/w Section 3(d) and 10(4) of FEMA, 1999, being the Managing Director and actively managing the affairs of the appellant company.
iv) Appellant 3 & 4 are exonerated and impugned order is also modified to this extent.
19. Seeing the fact that the quantum of contravention under Section 3(d) of FEMA s reduced to Rs. 43,45,260/- from Rs. 4,51,46,775/-, and confiscation of foreign currency equivalent to Rs. 28,43,322/- already stands confirmed, we are inclined to take a lenient view, in reducing the penalties on appellant no. 1 & 2 as under:
i. Appellant no. 1, M/s Shukla Forex Pvt. Ltd.
a.) Penalty of Rs.75,00,000/- (Rs. Seventy-Five Lac) is reduced to Rs. 4,50,000 (Four lakhs fifty thousand) for the contravention of Section 3(d) of FEMA, 1999 for contravention to the extent of Rs.43,45,260/-.
b.) Penalty of Rs.30,00,000/- (Rs. Thirty Lac) is reduced to Rs. 3,00,000 (Three Lakhs only) for the contravention of Section 10(4) of FEMA, 1999 for contravention to the extent of Rs. 1,53,74,072.10/-, as foreign currency of Rs. 28,43,322/- already stand confiscated.
Appellant no.2, Sh. Mohinder Pal Shukla-
a.) Penalty of Rs.45,00,000/- (Rs. Forty-Five Lac) is reduced to Rs. 1,00,000/- (One lakh only) for the contravention of section 3(d) r.w.s. 42 of FEMA, 1999.
b.) Penalty of Rs. 20,00,000/- (Rs. Twenty Lac) is reduced to Rs. 1,00,000/- (one lakh only) for the contravention of Section 10(4) r.w.s. 42 of FEMA, 1999.
The pre-deposit, if any, be adjusted against the reduced penalty amount as per this Final Order.
Appeals Serial no. 1 & 2 Partly Allowed.
Appeals Serial no. 3 & 4 Allowed.
Pronounced on 08th Day of October, 2026.
