Alliance Buildwell Projects Pvt. Ltd. Vs Directorate of Enforcement (Appellate Tribunal Under Safema At New Delhi)
FDI Condition Breach Upheld, Tribunal Cuts Penalty in Real Estate Project Case
The Appellate Tribunal under SAFEMA upheld the finding that M/s Alliance Buildwell Projects Pvt. Ltd. and its directors violated FEMA provisions by failing to meet the mandatory FDI condition of developing at least 50% of a real estate project within five years of statutory approval. Despite receiving approximately ₹43.84 crore in foreign investment, the company completed only about 18% of the project within the stipulated period.
The Tribunal rejected key defenses, holding that:
- Omission of Section 6(3)(b) of FEMA in 2015 does not extinguish liability for earlier contraventions.
- Commercial difficulties or delays do not absolve non-compliance with mandatory FDI conditions.
- Directors in charge of the company’s affairs are liable under Section 42.
However, the Tribunal noted that the funds were received through proper banking channels, remained invested in the project, and there was no diversion or mala fide intent. The violation was regulatory in nature rather than fraudulent.
Accordingly, while confirming the contravention, the Tribunal reduced the penalty from ₹10 crore to ₹5 crore on the company and from ₹1 crore each to ₹50 lakh each on the directors, partly allowing the appeals on the question of quantum
FULL TEXT OF THE ORDER OF APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI
By these batch of appeals, a challenge has been made to the order dated 05.12.2022 passed by Adjudicating Authority wherein penalties were imposed under Section 13(1) read with Section 42 of the Foreign Exchange Management Act, 1999 (FEMA) for contravention of provisions relating to non-fulfilment of conditions governing Foreign Direct Investment (FDI).
