SAFEMA Appellate Tribunal Cuts BPL, Ex-MD Penalties To ₹10L, ₹1L In ₹4.9 Crore FEMA Violation Case

The Appellate Tribunal under SAFEMA has reduced penalties on BPL Limited and its former Managing Director, Ajit G. Nambiar, to Rs. 10 lakh and Rs. 1 lakh respectively in a FEMA case over foreign remittances worth about Rs. 4.90 crore for which the company failed to prove imports. It, however, upheld the findings of contravention against both.

The coram comprising Members Balesh Kumar and Rajesh Malhotra was hearing appeals against an August 31, 2016 order passed by the Joint Director, Directorate of Enforcement, Bengaluru Zonal Office.

The adjudicating authority had imposed penalties on BPL Limited for contravention of Section 10(6) of FEMA read with Regulation 6(1) of the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000, and on Nambiar under Section 42 of FEMA.

The Directorate of Enforcement alleged that the company failed to furnish proof that imports had been made in relation to 13 foreign remittance transactions undertaken through HSBC and Citibank during 2000-01, involving a total amount of Rs. 4,90,43,501.66.

Before the Tribunal, the appellants argued that the proceedings were initiated nearly 15 years after the transactions, making the old records untraceable. They contended that the authorised dealer banks had failed to demonstrate proper follow-up and had not sent even a single reminder in respect of the disputed transactions.

They also argued that the penalty imposed was disproportionate, especially considering that BPL Limited had imported goods worth over Rs. 188 crore during 2001-02. Nambiar also argued that no separate penalty ought to have been imposed on him.

The respondent Directorate argued that Citibank and HSBC had confirmed following up with the company for furnishing the relevant documents. It also contended that Nambiar, as the Managing Director during the relevant period and the person responsible for the conduct of the company's business, was liable for the contravention.

Rejecting the delay defence, the tribunal noted that the company had been put to notice as early as November 28, 2002, regarding discrepancies in import documentation and had responded in January 2003 stating that it was searching its records.

The tribunal rejected the company's argument that it could avoid liability because the documents were no longer available after the passage of time.

“The argument of the Appellant Company that there is no duty cast on the importer to maintain the import documents could have been acceptable if they had not been put to notice way back in 2002 that for all the consignments imported by it, the Exchange Control Copies of the Bills of Entry were not available,” it observed.

“Moreover, after having promised to search for the required documents in their response dated 10.01.2003, the Appellant Company failed to follow up in spite of having such a large-scale import as quoted by them for the year 2001-02,” it added.

The tribunal also rejected the plea that the passage of time prevented the appellants from producing proof of imports, noting that the company had failed to preserve even alternative records.

“Their plea that the passage of long time prevented them from submitting proofs of imports against the reported remittances does not cut much ice given that in spite of having been put to notice they could not keep the safe custody of the documents relevant to dispute in hand,” it observed.

“It is surprising that a Company which was importing on a regular basis could not even produce alternative documents to sustain their contentions that for the remaining 13 remittances they had in fact imported goods,” the Tribunal added.

On Nambiar's liability, the Tribunal held that as the person responsible for the conduct of the company's affairs during the relevant period, he could not deny responsibility.

Accordingly, the appeals were partly allowed.

For Appellants: Advocates Aachal Basur, Abhay Kumar

For Respondent: Advocates Shoumendu Mukherji