Dismissed

FPA-FE-57/CHN/2015 of Shri K. Kalairajan v/s The Joint Director Directorate of Enforcement, Chennai

ATFP4 Oct 2017FPA-FE-57/CHN/2015

Case brief

AI extract

What is this about?

The Tribunal dismissed an appeal against a penalty imposed for violating foreign exchange control provisions. Despite the appellant claiming the funds were gifts from NRIs, the court found he received cheques in exchange for Indian cash, leading to a conviction under FERA.

What did the court decide?

Appeal dismissed; penalty of Rs. 50,000/- upheld.

FPA-FE-57/CHN/2015 of Shri K. Kalairajan v/s The Joint… — Company and Corporate | ATFP (2017)

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APPELLATE TRIBUNAL, FOREIGN EXCHANGE MANAGEMENT ACT

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AT NEW DELHI

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Date of Decision: 04.10.2017

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FPA-FE-57/CHN/2015

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Shri K. Kalairajan … Appellant Versus The Joint Director Directorate of Enforcement, Chennai … Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant	:	Shri S. Ravi, Advocate
For the respondent	:	Shri Prashant Pandey, Legal Consultant
CORAM
JUSTICE MANMOHAN SINGH	:	CHAIRMAN
JUDGEMENT

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FPA-FE-57/CHN/2015

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The appellant conducted auspicious function in the family and for that the close friends and relations were invited from India and from abroad. At the time of function the appellant has received several gifts including money in the form of Demand Draft and Cheque. The appellant has disclosed the payment received as gift to Income Tax Authority while filing the return for the financial year 1994-95/Assessment year 199596.

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The Enforcement Directorate received information from the Income Tax Department vide the letter IW/U/III(2)/95-96 dated 06.11.1995 that the appellant have received payments from various NRIs by way of gift.

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FPA-FE-57/CHN/2015

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Page 1 of 7

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On the basis of information investigation were conducted against the appellant.

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After conducting investigation a Memorandum was issued to the appellant in F.No. T.4/20/SZ/C/2001 dated 27.06.2001 alleging that he has contravened Section 9(1)(a) of FERA, 1973 and thereby rendered himself liable to be proceeded against him under section 50 of FERA, 1973 read with sub section (3) & (4) of Section 49 of Foreign Exchange Management Act, 1999.

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It was alleged in the Memorandum that the appellant a person residing in India without the general or special exemption from the Reserve Bank of India (RBI) has made payments totaling Rs.14,67,500/to various persons residing outside India in lieu of NRE Chques/Demand Drafts received from them.

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Accordingly the appellant was asked to show cause as to why the adjudication proceedings contemplated under Section 51 of FERA, 1973 read with sub-section (3) and (4) of Section 49 of FEMA, 1999 should not be held against him.

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The above said Memorandum was duly replied vide the appellant reply dated 04.12.2014 and Personal Hearing was also attended by the Counsel of the appellant.

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Thereafter an Order in Original No. AD/CEZO/01/2015(TR) dated 31.03.2015 in F.No. T-4/20/SZ/C/2001 has been passed by the Assistant Director of Enforcement Directorate (Adjudicating Authority). The Adjudicating Authority after taking into account the reply and submissions made during the Personal Hearing, imposed a penalty of Rs. 50,000/- on the appellant under Section 50 of FERA, 1973.

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The break up of the amounts received by Shri K. Kalairajan from NRIs in Kerala are as follows:

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FPA-FE-57/CHN/2015

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Page 2 of 7

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Sl. No.	Name of the Donor and address S/Shri	Bank Details	Cheque/DD No. and date	Amount given	Premiu m paid
(1)	(2)	(3)	(4)	(5)	(6)
1.	K.C. Baby, C/o Laloud Engg. Co. PO Box No. 10111, Dubai, UAE	A/c No. 11053, Canara Bank	Cheque No. 3688440/27.06. 1994	50,000/-	500/-
2.	Rajappan Nair, PO Box No. 3050, Felapephsa, USA	NRE- 660, Federal Bank	D.D. No.70836/22.06. 2014	1,60,000/-
3.	Mrs. Leelamma Chandran	NRE- 406, SBI	DD No. 363482/22.06.1 994	1,00,000/-
	Pillai, PO NO.	NRE-	DD No.	1,00,000/-
	258, Zilten, Libya	901778, SBI	622191/22.06.1 994		5000/-
4.	Mrs. Daley Thomas, PO Box No. 952, Al-Kendra Health Centre, Al-	NRE- 9676/2 SBI	DD No. 271185 21.06.1994	1,50,000/-

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FPA-FE-57/CHN/2015

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Page 3 of 7

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	Kendra, Jeddah
5.	M.P. Baby,	NRE-	DD No.	1,00,000/-	2000/-
	PO Box No. 5448, Manama, Bahrain	4890, UBI	71802/21.06.19 94
6.	Joseph	NRE-53,	DD No.	3,50,000/-
	George, PO	SBT	139517/21.06.1
	Box No. 80515, Tripoli, Libya		994
7.	Antony M.	NRE-	D.D. No.	2,00,000/-	Not
	Joseph, WSD,	7659,	041129/21.06.1		specific
	Salslat, PO	F.B.	994
	No. 22730, Sultanate, Oman
8.	P.G. Easo,	NRE-	DD No.	1,00,000/-
	C/o Badar,	902424,	003429/21.06.1
	Mullah &	SBT	994
	Bros., PO No. 4077, Safat, Kuwait
9.	Raju Thomas,	NRE-	DD No.	1,50,000/-
	C/o Ancy	622, SBT	003429/21.06.1
	Flat, 239, BWCK, 718,		994

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FPA-FE-57/CHN/2015

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Page 4 of 7

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A & AL,
Bahrain
14,60,000/ 7500/-
-
TOTAL (5+6) = 14,67,500

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From the statements recorded by the officers of the Income Tax department, it was found that Shri K. Kalairajan had approached several persons in Kerala who were NRIs and requested them to issue cheques/DDs from their NRE accounts maintained in India in lieu of the Indian money offered to them with commission/premium.

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One of the persons Shri K.C. Baby of Vazhikulam, Kerala who had given a gift of Rs. 50,000/- to Shri Kalairajan in his statement dated 23.11.96 given before the I.T. officers inter alia stated that he did not know Shri Kalairaja, that one Shri David Mathew of Vazhikulam approached him and told that if he could give a cheque from his NRE account he would be paid equivalent Indian rupees with 1% commission; that Shri David on the date of handing over the cheques received equivalent cash with the small commission; that he did not even know Shri Kalairajan; that the amounts given were not loans/gifts as he had received equivalent cash in Indian rupees; that he did not give any affidavits stating that these transactions with Shri Kalairajan or others were gifts; that the money received was used for house construction.

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With regard to the argument of Shri K.Kalairajan, that the said cheques/DDs were given as gifts by his friends, I find that the said argument as precarious in as much as from the profiles of the persons

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FPA-FE-57/CHN/2015

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Page 5 of 7

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who had given the cheques, it could be observed that there is no logical link or topographical connection between them for construing them as family friends of Shri K. Kalairajan. I note that the concept of receipt of gifts from the family friends, has just been invented by Shri K. Kalairajan in his attempt to circumvent the process of law. Further, he placed reliance on certain case laws and disputed that there are no independent corroborative material apart from the statements relied on by the department. However, in my opinion, the issues discussed in the said case laws are extraneous in nature and are not relevant to the present case. Further, I observe that initially a statement was recorded from Shri K. Kalairajan by the Officers of Income tax and while deposing the facts before the officers of Enforcement Directorate even after 2 years he neither retracted nor distorted the facts in earlier statements.

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However, it is the admitted position that Shri K. Kalairajan who did not dispute the receipt of the money both in his reply to the Memorandum and during the personal hearing before the Authority. He only attempted to project it as investment from friends. It is correctly mentioned in the impugned order that his denial that he had not given money in return for the cheques/DDs as the statements recorded rather confirmed that the cheques/DDs were received after making payment in cash. Admittedly penalty amount has been deposited by the appellant. I totally agree with the impugned order passed against Shri K. Kalairajan. There is no infirmity in the order. Even I am of the view that routine small function such a big amount is not possible to receive as gift from NRI. It is evident that against the gift amount, the cash must have been given by the appellant.

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FPA-FE-57/CHN/2015

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Page 6 of 7

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Therefore, I have no hesitation to hold the Noticee no. 1 Shri K. Kalairajan guilty of offence and contravened the provisions of section 9(1)(a) Foreign Exchange Regulation Act, 1973 and therefore he has been proceeded against under Section 50 of FERA, 1973. Considering the period of offence being far behind to the point of time of adjudication, I take lenient view while imposing penalty for the contraventions of Shri K. Kalairajan.

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There is no merit, the appeal is accordingly dismissed.

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No costs.

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(Justice Manmohan Singh) Chairman

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New Delhi,

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4^th October, 2017.

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‘d’

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FPA-FE-57/CHN/2015

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Page 7 of 7

FPA-FE-57/CHN/2015 of Shri K. Kalairajan v/s The Joint Director Directorate of Enforcement, Chennai

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FPA-FE-57/CHN/2015 of Shri K. Kalairajan v/s The Joint Director Directorate of Enforcement, Chennai

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