Zaveri Exports Pvt. Ltd Vs Directorate of Enforcement (Appellate Tribunal Under Safema At New Delhi)
FEMA Violation in Gold Trade Proven, But Tribunal Slashes ₹49 Cr Penalty
The Appellate Tribunal under SAFEMA upheld the finding that M/s Zaveri Exports Pvt. Ltd. and its director Sunil Kumar Tayal violated Sections 3(a) and 3(b) of FEMA by making illegal cash payments linked to gold purchases from Dubai through unauthorized channels. The case was based on seized diary entries (“Dubai transfer”), WhatsApp chats, and—crucially—the director’s own admissions confirming that cash was paid to local agents on instructions of Dubai-based sellers.
Rejecting the appellants’ arguments, the Tribunal held that:
- Payments made in India to agents of foreign entities fall within the prohibition of Section 3(b), even if made in INR.
- Diary entries were not standalone evidence but were corroborated by statements and digital records.
- Lack of direct verification from foreign parties does not negate admissions, especially in FEMA proceedings governed by the standard of preponderance of probabilities.
However, on the issue of penalty, the Tribunal found that the Adjudicating Authority had imposed the maximum penalty (₹39 crore on the company and ₹10 crore on the director) without proper reasoning. Considering proportionality and the admitted transaction value, the Tribunal reduced the penalty to ₹13 crore on the company and ₹3 crore on the director.
Accordingly, while the contravention was upheld, the appeals were partly allowed only to the extent of reduction in penalty.
FULL TEXT OF THE ORDER OF APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI
The present appeal has been filed under section 19 of the Foreign Exchange Management Act, 1999 (FEMA, 1999) against the order dated 15.02.2024 of the Adjudicating Authority wherein M/s Zaveri Exports Pvt. Ltd. and Shri Sunil Kumar Tayal, Director of M/s Zaveri Exports Pvt. Ltd. were held guilty of the contravention of section 3(a) & 3(b) and section 42(1) of FEMA, 1999 respectively. Penalty of Rs. 39,00,00,000/-and Rs. 10,00,00,000/- was imposed respectively.
