Union of India Vs Tamilnad Mercantile Bank Ltd. (Appellate Tribunal Under SAFEMA Delhi)
SAFEMA Tribunal Refuses to Confiscate Tamilnad Mercantile Bank Shares Despite FEMA Violations; Upholds Adjudicating Authority’s Discretion
The Appellate Tribunal under SAFEMA dismissed the Union of India’s appeal seeking confiscation of shares of Tamilnad Mercantile Bank (TMB) that had been transferred to foreign investors without prior RBI approval. The Directorate of Enforcement argued that, having upheld FEMA contraventions relating to the transfer of bank shares, escrow arrangements, guarantees, deposits, and foreign exchange transactions, the Adjudicating Authority ought to have exercised its powers under Section 13(2) of FEMA to confiscate the shares in addition to imposing substantial monetary penalties.
The Tribunal held that Section 13(2) of FEMA confers a discretionary, and not mandatory, power of confiscation. It observed that the statutory language-particularly the use of the expression “may, if he thinks fit”-makes it clear that confiscation is an additional discretionary measure which may be ordered alongside penalty where justified by the facts of the case. The Adjudicating Authority had passed a detailed and reasoned order imposing penalties on the bank, Standard Chartered Bank and various officials but consciously chose not to confiscate the shares. The Tribunal found no material to suggest that this discretion had been exercised arbitrarily or without application of mind.
The Tribunal further held that the Enforcement Directorate had failed to demonstrate how non-confiscation resulted in a miscarriage of justice or why the Adjudicating Authority’s exercise of discretion warranted appellate interference. Relying on the Supreme Court’s decision in State of M.P. v. Bharat Heavy Electricals, it reiterated that where a statute prescribes only the maximum penalty or provides discretionary powers, the adjudicating authority retains the discretion to determine the appropriate consequence. Accordingly, the Tribunal dismissed the Union of India’s appeal and upheld the Adjudicating Authority’s decision not to confiscate the TMB shares despite the established FEMA contraventions.
SAFEMA Tribunal held confiscation under Section 13(2) of FEMA is discretionary and upheld the decision not to confiscate TMB shares.
Cases Discussed
- State of MP and Ors. Vs. Bharat Heavy Electricals (SC), (1997) 7 Supreme Court Cases 1
FULL TEXT OF THE JUDGMENT APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI
This Order disposes of the Appeal No. FPA-FE-28/CHN/ 2021 filed by the Union of India through Deputy Legal Adviser, Directorate of Enforcement, Chennai against the Adjudication Order No. SDE/SRO/CEZO/10/2020(SK) dated 14.08.2020 (Impugned Order), passed by the Special Director, Enforcement Directorate, Government of India, Chennai, (Adjudicating Authority-AA). Ld. AA has imposed penalty of Rs. 11,33,21,688/-plus Rs. 5,66,60,844/- on the Tamilnad Mercantile Bank Ltd. (TMBL) for contravention of Section 6 (3) (b) of Foreign Exchange Management Act, 1999 (FEMA) read with Regulation 4 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulation, 2000. Ld. AA has further imposed penalty of Rs. 34,00,00,000/- plus Rs. 66,00,00,000/- on the Standard Chartered Bank (SCB) for the contraventions of Section 6 (3) (f) of FEMA read with Regulation 3 of the FEM (Deposit) Regulations, 2000 and Section 6 (3) (j) of FEMA read with Regulation 3 of the FEM (Guarantees) Regulations, 2000 respectively. Ld. AA has also imposed penalties ranging from Rs. 1,00,00,000/- to Rs. 5,00,000/- on the individual persons who were Chairman, Managing Director & CEO, Directors and Company Secretaries of TMBL at relevant points in time. The matter relating to SCB the officer concerned has suffered penalty of Rs. 40,00,000/-. Further penalty of Rs. 35,00,000/- has been imposed on Shri M G M Maran for the contravention of Section 4 & 8 of FEMA, Regulation 3 & 4 of FEM (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 and Regulation 3 of FEM (Foreign Currency Accounts by a person resident in India) Regulation 2000.
2. Investigation was initiated by the Appellant Directorate on 11.10.2011 on the basis of the information forwarded by Reserve Bank of India (RBI) vide letter No. F.E.C.O. FID 21969/10 21047 (34) 2010-11 dated 16.03.2011. The aforementioned RBI letter pointed out that the actual flow of funds for transfer of shares of Tamilnad Mercantile Bank Ltd. (TMBL) from Sterling Group of Companies to various individuals/entities need to be investigated. For the said purpose RBI also forwarded a copy of Amended and Re-stated Escrow and Transaction Settlement Agreement dated 12.05.2007 entered into among certain entities in relation to transfer of TMBL shares and copies of certain other correspondence. Consequent to such investigation the Appellant Directorate issued the Show Cause Notice (SCN) on 17.12.2014 to 26 Noticees, of whom 23 have filed Appeals which have been disposed of in a separate Order. The SCN was issued on the basis of the Complaint which was filed on 16.12.2014 under Section 16 (3) of Foreign Exchange Management Act, 1999 (FEMA). The Impugned Order has disposed of the SCN in terms of passing an Order relating to four set of issues. The first set of issues arise from transfer of 46,862 shares of TMBL to seven foreign investors without prior approval of RBI for a total consideration of Rs. 113,32,16,884/-. Such transfer of shares has been penalized for contravention of Section 6 (3) (b) of FEMA read with Regulation 4 of the Foreign Exchange Management (FEM) (Transfer or Issue of Security by a Person Resident outside India) Regulation, 2000. While the Appeal filed by TMBL challenges the findings made in the Impugned Order against it on this set of issues, the Appeals filed by the Noticee No. 2 to Noticee No. 14 challenging the findings against each of the Noticee, who has been penalized for the aforementioned contraventions in terms of Section 42 of FEMA. The second set of issues has arisen from the fact that subsequent to the transfer of 46,862 shares of TMBL, 13,209 shares of TMBL were further transferred to M/s Sub-Continental Equities Ltd., Mauritius on 26.12.2011 for total consideration of Rs. 90,31,41,094/- and 14,080 shares of TMBL were further transferred to M/s Robert & Adris James Company Ltd., Mauritius for a total consideration of Rs. 70,40,00,000/-. Such transfer of shares has been penalized for contravention of Section 6 (3) (b) of FEMA read with Regulation 4 of the FEM (Transfer or Issue of Security by a Person Resident outside India) Regulation, 2000. While the Appeal filed by TMBL challenges the findings made in the Impugned Order against it on this second set of issues, the Appeals filed by the Noticee No. 15 to Noticee No. 24 challenging the findings against each of the Noticee, who have been penalized for the aforementioned contraventions in terms of Section 42 of FEMA. The third set of issues has arisen from opening an Escrow Account in the name of “SCB Project Windmill (Sale Consideration) Escrow Account” and another Escrow Account in the name of “SCB Project Windmill (Shares) Escrow Account” on 12.05.2007 and allowing deposit in the said Escrow account totaling Rs. 113,32,16,884/- from 7 foreign entities, towards transfer of shares of M/s Tamilnad Mercantile Bank, which were not permitted for transfer by the Reserve Bank, and keeping 1,12,151 shares of M/s Tamilnad Mercantile Bank in the “SCB Project Windmill (Shares) Escrow account”, without any permission of the RBI. The third set of issues also relate to taking into custody title deeds of over 62 acres of land owned by Shri Ramesh Vangal (Director of M/s. Katra Holding Pvt. Ltd.) and M/s. Arudrama Developments Pvt. Ltd. (a company in which Shri Ramesh Vanagal was one of the Directors) and taking custody of TMBL shares as collateral/guarantee, in lieu of which Standard Chartered Bank, Mauritius granted a loan of US$ 35.4 Million to three foreign entities viz., M/s GHI I Ltd., M/s Katra Holdings Limited, Mauritius, and M/s RST Limited and a further loan of US$ 20 Million to M/s. Katra Holdings Limited, Mauritius, thus totaling to US$ 55.4 Million, equivalent to Rs. 221,00,00,000/-(approximately), without any special permission from the RBI. The third set of issues have been penalized for the contraventions of Section 6 (3) (f) of FEMA read with Regulation 3 of the FEM (Deposit) Regulations, 2000 and contraventions of Section 6 (3) (j) of FEMA read with Regulation 3 of the FEM (Guarantees) Regulations, 2000. While the Appeal filed by the Standard Chartered Bank challenges the findings made in the Impugned Order against it on this third set of issues, the Appeal filed by the Noticee No. 26 challenging the findings against the Noticee, who has been penalized for the aforementioned contraventions in terms of Section 42 of FEMA. The fourth and last set of issues has arisen from the fact that Shri M. G. M. Maran, the then Chairman and Director of TMBL, a person resident in India, without the permission of Reserve Bank of India, opened an account vide No.7102356 with M/s ABN Amro Bank NV., Singapore Branch, Singapore in his name and received foreign exchange amounting to US$ 68,50,000 (equivalent to Rs. 28,08,50,000/-) in the said account from M/s Katra Holdings Limited, Port Louis, Mauritius, as consideration, for facilitating and assigning the rights towards transfer of shares of TMBL in favour of M/s Katra Holdings Limited, consequent to agreement dated 02.03.2006 with M/s Katra Holdings. He also failed to repatriate the same into India. For the aforementioned transactions penalty has been imposed on Shri Maran for the contravention of Sections 4 and 8 of FEMA read with Regulation 3 & 4 of FEM (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 and Regulation 3 of FEM (Foreign Currency Accounts by a person resident in India) Regulation 2000. The Appeal filed by Shri M. G. M. Maran challenges not only the penalty imposed on him for the contraventions of FEMA in terms of Section 42 of FEMA for the first and second set of issues, but also the penalty imposed on him for the contraventions of FEMA arising out of fourth set of issues. It is pertinent to mention that the allegation of contravention of the provisions of Regulation 10.A (b) of the FEM (Transfer or Issue of Security by a Person Resident outside India) Regulation, 2000 has been dropped against the TMBL, as well as Chairman, Managing Directors, Directors and CEO, Company Secretary, who held such position at different points in time, since the allegations were found unsustainable in law. Same finding has been made of dropping the allegations for contravention of the provisions of Regulation 10.A (b) of the FEM (Transfer or Issue of Security by a Person Resident outside India) Regulation, 2000 with respect to Standard Chartered Bank and Shri Ranjan Ghosh.
3. The relevant provisions of law which have been invoked in the Impugned Order are enlisted below:
Section 6(3)(b), (f) and (j) of FEMA, read as under:
(3) Without prejudice to the generality of the provisions of sub-section (2), the Reserve Bank may, by regulations, prohibit, restrict or regulate the following: (b) transfer or issue of any security by a person resident outside India.
(f) deposits between persons resident in India and persons resident outside India.
(j) giving of a guarantee or surety in respect of any debt, obligation or other liability incurred, –
i. by a person resident in India and owned to a person resident outside India; or
ii. by a person resident outside India
Regulation 4 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, reads as under:
4. Restriction on an Indian entity to issue security to a person resident outside India or to record a transfer of security from or to such person in its books: – Save as otherwise provided in the Act or Rules or Regulations made thereunder, an Indian entity shall not issue any security to a person resident outside India or shall not record in its books any transfer of security from or to such person.
Provided that the Reserve Bank may, on an application made to it and for sufficient reasons, permit an entity to issue any security to a person resident outside India or to record in its books transfer of security from or to such person, subject to such conditions as may be considered necessary.
Regulation 3 of the Foreign Exchange Management (Deposit) Regulations, 2000, restricts deposits between a person resident in India and person outside India and reads as under:
Restriction on deposits between a person resident in India and person resident outside India:- Save as otherwise provided in the Act or regulations or in rules, direction and orders made or issued under the Act, no person resident in India shall accept any deposit from, or make any deposit with, a person resident outside India:
Provided that the Reserve Bank may, on an application made to it and being satisfied that it is necessary so do to, allow a person resident in India to accept or make deposit from or with a person resident outside India.
The Foreign Exchange Management (Deposit) (Third Amendment) Regulations 2007 (Notification No. FEMA 162/2007-RB) dated 18.09.2007 permitted opening of Escrow Account and Special account for transfer of shares/convertible debentures of an Indian Company through open offer/delisting/exit offer in accordance with the provisions of SEBI (Substantial Acquisition of Shares and Takeovers (SAST)) Regulations, 1997 or any other applicable SEBI Regulations, without approval of Reserve Bank of India vide Regulation 5(2A) with effect from 24.05.2007 only.
Prior to the amendment vide Notification No.FEMA162/2007-RB dated 18.9.2007 and prior to 24.5.2007, Foreign Exchange Management (Deposit) Regulations 2000 “prior approval of the Reserve Bank is required for opening of Escrow Account and Special account for transfer of shares/convertible debentures of an Indian Company through open offer/delisting/exit offer in accordance with the provisions of SEBI (Substantial Acquisition of Shares and Takeovers (SAST)) Regulations, 1997 or any other applicable SEBI Regulations” as per A.P (DIR Series) Circular No.62 dated 24.5.2007, issued by the Reserve Bank of India.
Regulation 3 of The Foreign Exchange Management (Guarantees) Regulations, 2000 reads as under:
Prohibition: Save as otherwise provided in these regulations, or with the general or special permission of the Reserve Bank, no person resident in India shall give a guarantee or surety in respect of, or undertake a transaction, by whatever name called, which has the effect of guaranteeing, a debt, obligation or other liability incurred by, a person resident outside India.
Section 4 of FEMA, reads as under:
Holding of Foreign Exchange:- Save as otherwise provided in this Act, no person resident in India shall acquire, hold, own, possess or transfer any foreign exchange, foreign security or any immovable property situated outside India.
Section 8 of FEMA, reads as under:
Realisation and repatriation of foreign exchange:- Save as otherwise provided in this Act, where any amount of foreign exchange is due or has accrued to any person resident in India, such person shall take all reasonable steps to realize and repatriate to India such foreign exchange within such period and in such manner as may be specified by the Reserve Bank.
Regulation 3 of the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations 2000 reads as under:
Duty of Persons to realize foreign exchange due: A person resident in India to whom any foreign exchange is due or has accrued shall, save as otherwise provided under the provisions of the Act, or the rules and regulations made thereunder, or with the general or special permission of the Reserve Bank, take all reasonable steps to realize and repatriate to India such foreign exchange, and shall in no case do or refrain from doing anything, or take or refrain from taking any action, which has the effect of securing-
a) that the receipt by him of the whole or part of that foreign exchange is delayed; or
b) that the foreign exchange ceases in whole or in part to be receivable by him
Regulation 4 of the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations 2000 reads as under:
Manner of Repatriation:- (1) On realization of foreign exchange due, a person shall repatriate the same to India, namely bring into, or receive in, India and-
a) Sell it to an authorized person in India in exchange of Rupees; or
b) Retain or hold it in account with an authorized dealer in India to the extent specified by the Reserve Bank; or
c) Use it for discharge of a debt or liability denominated in foreign exchange to the extent and in the manner specified by the Reserve Bank
(2) A person shall be deemed to have repatriated the realized foreign exchange to India when he receives in India payment in rupees from the account of a bank or an exchange house situated in any country outside India, maintained with an authorized dealer.
Regulation 3 of The Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2000 restricts and reads as under:-
Restriction on holding foreign currency account by a person resident in India:- Save as otherwise provided in the Act or rules or regulations made thereunder, no person resident in India shall open or hold or maintain a foreign currency account Provided further that the Reserve Bank, may on an application made to it, permit a person resident in India to hold or maintain a Foreign currency account, subject to such terms and conditions as may be considered necessary.
13. Penalties.—(1) If any person contravenes any provision of this Act, or contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under this Act, or contravenes any condition subject to which an authorisation is issued by the Reserve Bank, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where such amount is quantifiable, or up to two lakh rupees where the amount is not quantifiable, and where such contravention is a continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues.
(2) Any Adjudicating Authority adjudging any contravention under sub-section (1), may, if he thinks fit in addition to any penalty which he may impose for such contravention direct that any currency, security or any other money or property in respect of which the contravention has taken place shall be confiscated to the Central Government and further direct that the foreign exchange holdings, if any, of the persons committing the contraventions or any part thereof, shall be brought back into India or shall be retained outside India in accordance with the directions made in this behalf.
Explanation.—For the purposes of this sub-section, “property” in respect of which contravention has taken place, shall include—
(a) deposits in a bank, where the said property is converted into such deposits;
(b) Indian currency, where the said property is converted into that currency; and
(c) any other property which has resulted out of the conversion of that property.
4. Ld. Counsel for the Appellant Directorate submitted that being aggrieved by the said Order No. SDE/SRO/CEZO/10/ 2020(SK) dated 14.08.2020 of Special Director of Enforcement, the Appellant begs to move this appeal on the following amongst other grounds:
1. The Order No. SDE/SRO/CEZO/10/2020(SK) dated 14.08.2020 (Impugned Order) passed by the Ld. Adjudicating Authority is against law, weight of evidence and probabilities of the case, thus liable to be set aside.
2. Ld. Adjudicating Authority did not consider the object of the Act, that it is an Act to consolidate and amend the law relating to Foreign Exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of Foreign Exchange market in India.
3. Ld. Adjudicating Authority did not consider that the contravention under FEMA shall affect the financial systems of the country.
4. Ld. Adjudicating Authority has failed to apply his mind to the facts of the case. The Complaint lucidly narrates the nature of activities committed by the Noticees and therefore it is imperative to order confiscation of shares which have been illegally transferred.
5. Ld. Adjudicating Authority has held that the Respondents have contravened the provisions of Section 6(3)(b) of FEMA, 1999 read with Regulation 4 of Foreign Exchange Management (Transfer or issue of Security by a person Resident Outside India) Regulation, 2000. Hence, it ought to have ordered for confiscation of the 46,862 TMBL shares which were illegally transferred to the foreign investors without prior approval of RBI valued at Rs.113,32,16,884/- at the relevant time and a part of which were further transferred without the approval of RBI i.e., 13,209 shares of M/s. TMBL in the name of Sub-Continental Equities Ltd., Mauritius and 14080 shares of M/s. TMBL to M/s. Robert & Adris James Company Ltd., Mauritius, under Section 13(2) of FEMA.
6. Ld. Adjudicating Authority failed to examine 2(za) of FEMA while passing the Order that the shares are also covered under the term “Security” for the purpose of Section 13(2) in addition to Section 13(1) of FEMA.
Ld. Counsel for the Appellant Directorate pleaded that based on the totality of the facts and circumstances of this case, this Hon’ble Tribunal may be graciously pleased to allow the instant appeal and order confiscation of the above-mentioned shares of M/s. TMBL which were illegally transferred to the foreign investors, without RBI permission, in terms of Section 13(2) of FEMA or may be pleased to remand the matter for de-novo adjudication, in the interest of justice and equity.
5. Ld. Counsels for the Respondents submitted that that they have given comprehensive grounds for setting aside the Impugned Order in their respective Appeals. Even otherwise there is no ground made out by the Appellant Directorate as to order the confiscation of the impugned shares under Section 13 (2) of FEMA. They pleaded that the provisions of Section 13 (2) of FEMA provide for confiscation in addition to the penalties not mandatorily. The word use in the provision ‘may’. Hence, it has been left to the discretion of the Adjudicating Authority. Since, the Ld. AA has already disposed of the matter through the Impugned Order wherein only penalty have been imposed and no confiscation has been ordered, then there is no question that at this stage of Appeal confiscation can be ordered. Ld. Counsel for the Respondents therefore pleaded to dismiss the Appeal filed by the Appellant Directorate.
6. We have considered the rival submissions and the material on The ground taken to file the Appeal is to plead for confiscation of shares, since these were illegally transferred. It is pleaded that once the Ld. Adjudicating Authority has held that the Respondents have contravened the provisions of Section 6(3)(b) of FEMA read with Regulation 4 of Foreign Exchange Management (Transfer or issue of Security by a person Resident Outside India) Regulation, 2000, then it ought to have ordered for confiscation under Section 13(2) of FEMA, of the 46,862 TMBL shares which were illegally transferred to the foreign investors without prior approval of RBI valued at Rs.113,32,16,884/- at the relevant time and a part of which were further transferred without the approval of RBI i.e., 13,209 shares of M/s. TMBL in the name of Sub-Continental Equities Ltd., Mauritius and 14080 shares of M/s. TMBL to M/s. Robert & Adris James Company Ltd., Mauritius. The Appellant has stated that the Ld. Adjudicating Authority has ignored the provisions of Section 13 (2) of FEMA which provides for confiscation.
7. Section 13 (1) and Section 13 (2) of FEMA state as follows:
“(1) If any person contravenes any provision of this Act, or contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under this Act, or contravenes any condition subject to which an authorization is issued by the Reserve Bank, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where such amount is quantifiable, or up to two lakh rupees where the amount is not quantifiable, and where such contravention is a continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues.
(2) Any Adjudicating Authority adjudging any contravention under sub-section (1), may, if he thinks fit in addition to any penalty which he may impose for such contravention direct that any currency, security or any other money or property in respect of which the contravention has taken place shall be confiscated to the Central Government and further direct that the foreign exchange holdings, if any, of the persons committing the contraventions or any part thereof, shall be brought back into India or shall be retained outside India in accordance with the directions made in this behalf.
Explanation.—For the purposes of this sub-section, “property” in respect of which contravention has taken place, shall include—
(a) deposits in a bank, where the said property is converted into such deposits;
(b) Indian currency, where the said property is converted into that currency; and
(c) any other property which has resulted out of the conversion of that property.
8. On reading of Section 13 (1) & (2) of FEMA, it is obvious that besides the penalty which can be imposed for contravention of any provision of FEMA or any Rule, Regulation, Notification, Direction or Order issued in exercise of the Powers under this Act, or for contravention of any condition subject to which an authorization is issued by the Reserve Bank, the Ld. Adjudicating Authority may, if he things fit in addition to any penalty which he may impose for such contravention direct that any currency or security or any other money or property in respect of which the contravention has taken place shall be confiscated to the Central Government. We find from the language of the Section, that the Section has not prescribed either a fixed amount of penalty or minimum amount of penalty. It therefore, follows that the amount of the penalty which is to be imposed by the Ld. Adjudicating Authority is a matter of discretion which, of course, is necessarily required to be exercised judiciously after taking into account the facts of the case and the evidence placed before it. The exercise of the judicious discretion on the part of the Ld. Adjudicating Authority becomes all the more obvious with respect to the provisions of Section 13 (2) of FEMA. The provision explicitly uses the word ‘may’ and then the phrase ‘if he thinks fit in addition to any penalty’. It is therefore clear that the Ld. Adjudicating Authority which is adjudging any contravention under the Section may decide to order confiscation if it thinks fit in addition to the imposition of penalty to do so. In the instant case the Ld. Adjudicating Authority has decided to impose penalties and has not chosen to order confiscation of the shares which were found to have been transferred without the permission of the RBI, in the contravention of Section 6 (3) (b) of FEMA read with Regulation 4 of Foreign Exchange Management (Transfer or issue of Security by a person Resident Outside India) Regulation, 2000. Given the facts of the case and the evidence placed before the Ld. Adjudicating Authority, we do not find that the Impugned Order has been passed without due application of mind. In fact, it is well reasoned and speaking. The Appellant has failed to show the reason why not confiscating the impugned shares should be regarded as miscarriage of justice.
9. The question as to when a penalty is to be regarded as either low or high is at best answered subjectively. Similarly, the question of ordering of confiscation of the impugned shares is best left to judicial exercise of the discretion available under the statutory provisions of Section 13 (2) of FEMA. In the facts and circumstances of the present case, it is seen that the Ld. Adjudicating Authority has not only taken notice of the facts of the case, but also has evaluated the evidence on record. In any case, there is no such mandatory requirement under the statute as to impose maximum penalty and order confiscation. The reading of the Impugned Order, therefore, reflects objectivity and judiciousness on the part of the Adjudicating Authority.
10. The Hon’ble Supreme Court in State of MP and Ors. Vs. Bharat Heavy Electricals [(1997) 7 Supreme Court Cases 1] in its order dated 14.08.1997 held that in a statute prescribing the provision for penalty equal to ten times the amount of entry tax, the statute prescribed only a maximum limit and did not prescribe an irreducible amount depriving the assessing authority of any discretion in this regard. The stand of the State in the case supra conceded that the assessing authorities are not bound to levy fixed penalty equal to ten times the amount of entry tax. In fact, in the present case the statute (FEMA) itself provides for a penalty which can be maximum of thrice the sum involved in such contravention and provides for confiscation as possible exercise of discretion if the Ld. Adjudicating Authority thinks it fit to order in addition to any penalty. The provisions of the Section thereby give explicit scope to the Adjudicating Authority to exercise its discretion, albeit judiciously, for imposition of penalty and order confiscation.
11. In view of the Appeal having failed to bring out the reasons that why the confiscation was to be ordered and as to how the Ld. Adjudicating Authority has not exercised its discretion judiciously, we observe that the order of the Ld. Adjudicating Authority cannot be interfered with. In view of the aforementioned discussions and observations, the Appeal No. FPA-FE-28/CHN/2021 filed by Union of India, Deputy Legal Advisor, Chennai fails and is dismissed. Applications pending, if any, are disposed of accordingly.
