Foreign Assets Acquired Before Section 37A but Held Thereafter Can Trigger Seizure: SAFEMA

Smt. Lakshmi Anil Salgaocar Vs Commissioner of Customs (Appeals) (Appellate Tribunal under SAFEMA, New Delhi)

Foreign Assets Generated Before Section 37A but Continued to Be Held Abroad Thereafter Can Trigger Seizure of Equivalent Indian Assets: SAFEMA Tribunal

Summary: The Appellate Tribunal under SAFEMA has held that Section 37A of FEMA can be invoked where foreign assets or foreign exchange allegedly acquired before the provision came into force continued to be held abroad after its introduction on 09.09.2015.

The Tribunal rejected the contention that such action amounted to retrospective application of Section 37A. It upheld the seizure of shares worth approximately ₹1.52 crore held by the estate in 33 Indian companies, as value-equivalent assets against suspected foreign exchange of approximately USD 690.65 million—₹5,718.59 crore—held outside India.

Background of the case

The Enforcement Directorate initiated an investigation against late Shri Anil Salgaocar based on information emerging from the Panama and Pandora Papers.

The investigation revealed that five companies had been incorporated in the British Virgin Islands:

• Ling Tao Trading Ltd.;
• Sino Ling Tao Resources Ltd.;
• GBA Minmetals Trading Ltd.;
• Cheermark Global Ltd.; and
• Joyking Global Ltd.

According to the Directorate, these companies procured iron ore from Salgaocar Group concerns in India and resold it in the Chinese market. During 2004-2012, approximately 22.75 million tonnes of iron ore were allegedly traded, generating turnover of about USD 1.794 billion and net trading profits of approximately USD 690.65 million.