SAFEMA Appellate Tribunal Upholds ₹3 Crore FEMA Penalty Against Thomas Cook India

The Appellate Tribunal under SAFEMA at New Delhi has upheld penalties of Rs. 1.5 crore each imposed on Thomas Cook India Ltd. for contraventions relating to the issuance of forex cards worth over Rs. 14.29 crore to 255 persons while exonerating its General Manager Amit Bhatia.

The tribunal, comprising members Balesh Kumar and Rajesh Malhotra, was dealing with appeals filed by Thomas Cook India Ltd. and Bhatia against the adjudication order dated March 30, 2020, passed by the Additional Director, Directorate of Enforcement, Chennai.

Separate penalties of Rs. 1.5 crore each were imposed on the company for contraventions of Sections 10(4) and 10(5), and Section 3(a) of the Foreign Exchange Management Act (FEMA).

Separate penalties had also been imposed on Bhatia under Sections 42(1) and 10(6) of FEMA read with Regulation 6(1) of the Foreign Exchange Management (Realization, Repatriation, and Surrender of Foreign Exchange) Regulations, 2000.

The matter arose from an ED investigation into 255 transactions involving the sale of Forex Travel Prepaid Cards worth about Rs. 14.29 crore.

According to ED, the cards were issued in the names of passengers who either denied receiving them or stated that they had never travelled abroad.

The investigation found that the company received payments from unknown or unrelated third parties, including another Full-Fledged Money Changer, Sree Chakra Forex Pvt. Ltd., instead of the actual passengers, and failed to verify original passports.

Thomas Cook India argued that as an “Authorised Person” under FEMA, it fell within RBI's regulatory jurisdiction and that penalties under Section 13 could not be imposed in the manner adopted by ED.

It also argued that Section 3(a) could not simultaneously be invoked with Sections 10(4) and 10(5).

Rejecting the contention, the tribunal observed, “A Full-Fledged Money Changer who has been given a licence to operate under certain conditions and obligations cannot have the liberty to contravene various provisions of FEMA 1999 and plead that only RBI can adjudicate the contraventions under Section 11"

On the nature of violations, the tribunal held that the very scheme of Forex Travel Pre-Paid Cards required companies to verify the genuineness of passengers and exercise caution while issuing foreign exchange.

“The very fact that the Appellant Company allowed itself to retain photocopies of passport by obtaining such photocopies through third persons or agencies, demonstrates the lack of caution and care which were required for the discharge of its responsibility and functioning,” it observed.

Holding that the company failed to exercise due diligence and committed violations of FEMA obligations, the Tribunal upheld the Rs. 3 crore penalty imposed on it.

However, upon examining transfer records, the Tribunal found that Bhatia was posted in Jaipur and Chandigarh during the relevant period between March and September 2014, and took charge of the South Region only in February 2016.

It therefore held that the penalties imposed upon him under Sections 42(1) and 10(6) of FEMA could not be sustained.

Accordingly, Thomas Cook's appeal was dismissed, while Bhatia's appeal was allowed and the penalties imposed on him were set aside.

For Appellants: Dr. M. R. Venkatesh, Rakesh Karala

For Respondent:  Vivek Gurnani, Kanishk Maurya