Chartered Accountant charged with FERA violation and Rs 26 lakhs penalty imposed – His plea that he was not a person resident in India, not accepted because documents not authenticated – Matter remanded: Bombay High Court

MUMBAI, MAY 20, 2009: BY this appeal, the appellant seeks to challenge the order passed by the Appellate Tribunal for Foreign Exchange dismissing the appeal wherein order of the respondent no.1 Deputy Director of Enforcement Directorate imposing penalty of Rs.26 lacs was challenged.

According to the appellant, he is Chartered Accountant by profession and is also a partner of M/ s.D.J.Shukla & Company Chartered Accountants at Mumbai. Prior to his departure for U.K., the appellant was active partner of M/s. D.J.Shukla & Company. However, after his departure for U.K., he is a dormant partner. According to him, on 2nd September, 1992, he was appointed by M/s. Synthetic and Chemicals Ltd. as their representative in U.K. and on 25th March, 1993 M/s. Synthetic Chemicals Ltd. placed the appellant’s services at the disposal of M/s. Nova Atliantis in England. Accordingly, the appellant shifted to U.K. in September, 1992 and he was granted residence permit in U.K. from 16th November, 1992. His wife and two children also left India in June, 1993 and settled down in U.K. along with the appellant. On 8th August, 1998, M/ s.D.J.Shukla & Company made an application to the Reserve Bank of India for permission for continuation of the appellant, as non resident partner of the said firm and by letter dated 5th January, 1990, Reserve Bank of India informed that there was no requirement to obtain such permission.

On 2nd November, 2000, respondent no.1 issued a show-cause notice to the appellant contending that he had transferred an amount of sterling pounds 75,000 in contravention of the provisions of 8(1), 25(1) and 14(a) of the FERA for purchase of the house in London in the name of his wife and two sons. The appellant replied on 8th March, 2001 and 19th May, 2003 contending that he is not a person residing in India for the purpose of FERA and he also had not transferred the amount of sterling pounds 75,000 or any other amount in contravention of the FERA and, therefore, show-cause notice is liable to be withdrawn. However, on 10th July, 2003, the respondent no.1 passed an order-in-original confirming the charges and imposing penalty of Rs.26 lacs .

In the said order, respondent no.1 noted that one Tanil Kilachand had transferred huge funds abroad through hawala to use a portion of the same to purchase / procure the house at London for the appellant. The respondent no.1 also noted that the documents produced by the appellant in support of his contentions were not authenticated in terms of Section 72 of the said Act and, therefore, they could not be relied. The appellant preferred an appeal before the Appellate Tribunal which was heard on 10th November and 17th November, 2006. However, for a long time, no order was passed in appeal. On 23rd April, 2007, the appellant received notice dated 30th March, 2007 from the Appellant Tribunal to the effect that the appeal was required to be heard and for that purpose, appeal was fixed on 18th July, 2007. On 18th July, 2007 authorised representative of the appellant appeared before the Appellate Tribunal for re-hearing. At that time Bench of the Appellate Tribunal observed that no hearing was required. On that day, no order was pronounced by the Appellate Tribunal. On 2nd January, 2009, the appellant received the order purporting to have been passed by the Appellate Tribunal on 6th December, 2007 whereby the order passed by the respondents imposing penalty was confirmed. According to the appellant for more than one year, the Appellate Tribunal had not passed any order after completion of the hearing and that order was communicated more than one year after the order dated 6th December, 2007 was passed.

4. Section 2(p) of the FERA Act reads as follows:

“2(p) “person resident in India” means- ( i ) a citizen of India, who has, at any time after the 25th day of March, 1947 been staying in India, but does not include a citizen of India who has gone out of, or stays outside, India, in either case-

(a) for or on taking up employment outside India, or

(b) for carrying on outside India a business or vocation outside India, or

(c) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;

The High Court observed,

In the present case, the appellant tendered certain documents in respect of his claim that he is non resident of India since September, 1992 and, therefore, provisions of Section 8 and Section 25 are not applicable to him. In fact, the first question in the present matter would be whether, during the relevant period, when the appellant had allegedly purchased the house in London in the name of his wife and two sons, he was or was not resident in India within the meaning of Section 2(p) of FERA Act. It was not necessary for the Appellate Authority to raise any presumptions under Section 72 in respect of documents produced by him in support of his claim that he was not resident of India. The appellant could prove the facts and those documents independently by leading evidence without any presumption about the genuineness or otherwise of the said documents. Record reveals that the appellant had produced several documents including letters from his employer, his passport and certain correspondence with the Reserve Bank of India which would indicate that he was not resident in India since September, 1992.

The documentary evidence which was placed by the appellant before the Appellate Authority should have been considered independently of provisions of Section 72 of the FERA . The appellant could prove his contention with evidence available including the documents. If the documents are not authenticated the appellant could be given opportunity to prove the documents and their contents. His contention could not be rejected merely because the documents were not authenticated. The authorities below committed error by ignoring those documents only because those documents were not authenticated as required under Section 72. In such circumstances, the matter needs to be remanded back to the respondent no.1 .

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