Assistant Director Vs Deepak Vohra (Appellate Tribunal under SAFEMA, New Delhi)
Repatriation of Foreign Exchange Justifies Release of Equivalent Indian Assets Seized Under FEMA: Tribunal
Introduction
The Appellate Tribunal under SAFEMA, New Delhi, dismissed the Enforcement Directorate’s appeal against an order declining to confirm seizure of Deepak Vohra’s Indian property under Section 37A of the Foreign Exchange Management Act, 1999 (FEMA).
The Tribunal held that seizure of Indian assets equivalent to foreign exchange suspected to be held abroad is inherently temporary. Since Vohra had repatriated the disputed foreign exchange to India, the Tribunal upheld the Competent Authority’s order by applying the proviso to Section 37A(4).
Background of the Dispute
According to the Enforcement Directorate (ED), Deepak Vohra was a Non-Resident Indian until June 2011. The Department alleged that foreign exchange aggregating to USD 247,713.40 had been received from various firms and entities between April 2011 and August 2015 in his account with Bank of Baroda, Dubai, in contravention of Section 4 of FEMA.
The ED stated that Vohra transferred USD 15,000 on 12 June 2013 and USD 7,970.17 on 9 October 2016 to his Indian account.
It further alleged that the remaining USD 224,743.27 had been transferred in tranches to his son’s and daughter’s overseas bank accounts during 2011–2016. The Department treated this amount as continuing to be held abroad by Vohra through those transfers.
Seizure of Equivalent Property in India
The ED valued the disputed foreign exchange at ₹1,43,96,536.97, applying an exchange rate of ₹64.0577 per US dollar.
On 21 December 2017, it issued a seizure order concerning equivalent-value property belonging to Vohra in India under Section 37A(1).
However, the Competent Authority, through its order dated 14 June 2018, declined to confirm the seizure. The ED challenged that decision before the Tribunal.
The Department’s appeal raised objections concerning the applicability of Section 37A to foreign exchange acquired before its notification and the calculation of the prescribed monetary threshold.
Department’s Arguments
The ED argued that Vohra continued to hold the disputed foreign exchange abroad even after Section 37A became operative. Consequently, it maintained that invoking the provision did not involve an impermissible retrospective application.
The Department also disputed the Competent Authority’s finding concerning foreign exchange being below ₹1 crore. It contended that the Authority had incorrectly calculated the relevant amount by considering the period after notification until closure of the overseas account.
Importantly, however, the Department’s counsel acknowledged that verification established that Vohra had repatriated USD 224,743.27 to his Indian account on 11 May 2018.
Respondent’s Reliance on Repatriation
Vohra relied on the proviso to Section 37A(4). He submitted that the provision expressly permits an appropriate order, including setting aside seizure, where the person concerned discloses the overseas asset and brings it back into India.
His argument focused on the statutory consequence of repatriation rather than solely on the objections concerning the original seizure.
Since the disputed foreign exchange had already returned to India, he requested dismissal of the Department’s appeal and affirmation of the Competent Authority’s order.
Statutory Framework Under Section 37A(4)
The Tribunal examined the provision governing the continuation of a confirmed seizure.
Under Section 37A(4), confirmation ordinarily continues until disposal of adjudication proceedings. The Adjudicating Authority must then issue appropriate directions concerning further action on the seized assets.
The proviso addresses a situation where the aggrieved person discloses the foreign exchange, foreign security or immovable property and brings it back into India during the proceedings.
Upon an application and after hearing the person concerned and the ED’s representatives, the relevant authority must pass an appropriate order, which may include setting aside the seizure.
Tribunal’s Findings
The Tribunal described equivalent-value seizure of Indian assets as “inherently of transient nature.” It emphasised that the statutory arrangement contemplates relief when the foreign exchange underlying the seizure is brought back into India.
In the present case, repatriation was undisputed. The ED itself accepted that the entire disputed amount of USD 224,743.27 had reached Vohra’s Indian account on 11 May 2018.
The Tribunal therefore upheld the refusal to confirm seizure on this ground. Its decision rested on Section 37A(4) and the established repatriation, without separately resolving the Department’s objections on retrospective applicability or threshold computation.
Final Decision and Significance
The Tribunal dismissed the ED’s appeal and upheld the Competent Authority’s order for the reasons relating to repatriation.
The ruling highlights the importance of verified repatriation when seeking relief from equivalent-value seizure under FEMA. It concerns continuation of seizure; the order does not separately determine whether the original foreign exchange transactions constituted a contravention or decide any penalty arising from them.
FULL TEXT OF THE ORDER OF APPELLATE TRIBUNAL UNDER SAFEMA, NEW DELHI
This Order disposes of the Appeal No. FPA-FE-63/DLI/2018 filed by The Assistant Director, Directorate of Enforcement, Delhi, against the Order No. ED/DV/01/2018 dated 14.06.2018 (Impugned Order) passed by the Commissioner of Customs (Appeals), Competent Authority, under Section 37 A (2) of Foreign Exchange Management Act, 1999 (FEMA). Ld. Competent Authority (CA) has not confirmed the Seizure Order No. HIU/S.O./5/37A/2017/AD(RRK) dated 21.12.2017 (IN T-3/2-D/2016).
2. Ld. Counsel for the Appellant Department submitted that Shri Deepak Vohra was a Non-Resident Indian till June 2011 and after he ceased to be an NRI, he acquired foreign exchange to the tune of USD 247713.4 in various tranches from April 2011 to August 2015 from various firms and entities in contravention of the provisions of Section 4 of FEMA, in his bank account number 90010100006946 standing with Bank of Baroda, Dubai branch. Sh. Deepak Vohra transferred USD 15,000 on 12.06.2013 and USD 7970.17 on 09.10.2016 in his Indian account. Further, Sh. Deepak Vohra transferred the balance amount of USD 224743.27 to his son’s and daughter’s bank accounts held outside India, in various tranches during the period 2011-2016. Therefore, a total amount of USD 224743.27(worth Rs. 1,43,96,536.97 @ Rs. 64.0577 per USD) was still being held by him by way of transfer to his son and daughter outside India. Therefore, the said seizure was effected on the reason to believe that foreign exchange worth USD 224743.27 (worth Rs.1,43,96,536.97 @ Rs. 64.0577 per USD) was suspected to be held outside India by Shri Deepak Vohra in contravention of Section 4 of FEMA. Thus, the equivalent value of the property of Shri Deepak Vohra in India, to the tune of USD 224743.27 (worth Rs. 1,43,96,536.97 @ Rs. 64.0577 per USD), was liable to be seized in terms of Section 37A (1) of FEMA, in terms of G.S.R. 702(E) dated 16.09.2015 and G.S.R. 701(E) dated 16.09.2015 issued by the Ministry of Finance (Department of Revenue, Government of India). Ld. Counsel argued that Sh. Deepak Vohra continued to hold the aforementioned foreign currency abroad till 11.05.2018 and hence, the seizure made on 21.12.2017 of his property of equivalent value in India was correct and lawful. He therefore challenged the finding made in the Impugned Order that the foreign exchange acquired by Shri Deepak Vohra before 09.09.2015 i.e. when the provisions of Section 37A of FEMA were notified, could not have been seized because the provisions of the act could not have retrospective operation. Ld. Counsel contended that Shri Deepak Vohra continued to hold the foreign exchange even after the date of Notification of Section 37A of FEMA and hence, the provisions thereof were applicable. Ld. Counsel further challenged the finding made by the Ld. Competent Authority with regard to the value of foreign exchange held abroad being less than Rs. 1,00,00,000/-. Ld. Counsel challenged it on the grounds that the Ld. Competent Authority had erred in making such calculation on the basis of the amount being available after the date of Notification till the closing of the account on 09.10.2016. Ld. Counsel fairly admitted that the Appellant Department has on verification found that Shri Deepak Vohra repatriated the foreign exchange of value USD 224743.27 to his account in India on 11.05.2018. Ld. Counsel therefore pleaded to allow the Appeal.
3. Ld. Counsel for the Respondent Shri Deepak Vohra submitted that the proviso to Section 37A (4) of FEMA is unambiguous. In this regard, he cited the following from the Impugned Order:
“Proviso to Section 37A (4) lays down that the Competent Authority or the Adjudicating Authority, as the case may be, on receipt of an application in this regard from the aggrieved person, and after affording an opportunity of being heard to the aggrieved person and representatives of the Directorate of Enforcement, shall pass an appropriate order, as it deems fit, including setting aside of the seizure made under Sub-section (1). The wording “shall” construes that an order has to be passed mandatorily. Similarly, “as it deems fit” may be interpreted as within the four corners of the statute and keeping in view the object and purpose of the provisions of the Act. By employing the words “appropriate order” including “setting aside of the seizure made”, the interpretation may be that an appropriate order shall be passed and it includes setting aside of seizure. The reading of the entire proviso signifies that if the aggrieved person brings back foreign exchange, foreign security or immovable property at any stage of proceedings, the seizure order could be set aside on facts and circumstances of the case.”
Ld. Counsel therefore pleaded to dismiss the Appeal and uphold the Impugned Order.
4. We have considered the rival submissions and the material on record. We find the provisions of Section 37A (4) of FEMA, in particular its proviso, are of significance in the facts and the circumstances of the present case. The said provisions are reproduced below:
“37A. Special provisions relating to assets held outside India in contravention of section 4.—
(4) The order of the Competent Authority confirming seizure of equivalent asset shall continue till the disposal of adjudication proceedings and thereafter, the Adjudicating Authority shall pass appropriate directions in the adjudication order with regard to further action as regards the seizure made under sub-section (1):
Provided that if, at any stage of the proceedings under this Act, the aggrieved person disclosed the fact of such foreign exchange, foreign security or immovable property and brings back the same into India, then the Competent Authority or the Adjudicating Authority, as the case may be, on receipt of an application in this regard from the aggrieved person, and after affording an opportunity of being heard to the aggrieved person and representatives of the Directorate of Enforcement, shall pass an appropriate order as it deems fit, including setting aside of the seizure made under Sub-section (1).”
Reading of the said provisions makes it obvious that the seizure made of assets in India of equivalent value to the amount of foreign exchange lying abroad is inherently of transient nature. The provisions stipulate that the seizure shall continue till the disposal of the adjudication proceedings or in the alternative would get set aside, if at any stage of the proceedings the Appellant brings back the foreign exchange lying abroad, to India. We find that it is not disputed that the Respondent Shri Deepak Vohra has brought back the equivalent amount of the aforementioned foreign exchange USD 224743.27 to his account in India on 11.05.2018. Moreover, the provisions of Section 37A (4) of FEMA make it clear that the seizure in itself will be set aside as and when such eventuality happens.
5. In view of the aforementioned discussions and analysis, we dismiss the Appeal No. FPA-FE-63/DLI/2018 filed by the Assistant Director, Directorate of Enforcement, Delhi and uphold the Impugned Order of the Competent Authority for the reasons mentioned in preceding Paragraph 4 of this Order. Applications pending, if any, are disposed of accordingly.
