Remanded

FPA-FE-1241/MUM/2004 of Shri Moolchand S. Shah @ Choksi v/s The Special Director, Directorate of Enforcement, Mumbai

ATFP13 Nov 2018FPA-FE-1241/MUM/2004

Case brief

AI extract

What is this about?

The Appellate Tribunal allowed the appeal against a penalty order under Section 9(1)(b) and (d) of FERA, 1973. The Tribunal remanded the matter to the original adjudicating authority with directions to specifically address the issue of whether the payments were made to or from persons resident outside India, noting that the establishment of this condition is fundamental for an action under FERA.

What did the court decide?

The appeal was allowed by way of remand to the original adjudicating authority to deal with the issue of residency of the counterparties and pass a speaking order within four months.

FPA-FE-1241/MUM/2004 of Shri Moolchand S. Shah @… — Pension and Retirement Benefits | ATFP (2018)

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APPELLATE TRIBUNAL FOR SAFEMA, FEMA, PMLA, NDPS, PBPT ACT AT NEW DELHI

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DATE OF JUDGMENT: 13.11.2018

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FPA-FE-1241/MUM/2004

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Shri Moolchand S. Shah @ Choksi … Appellant Versus The Special Director, Directorate of Enforcement, Mumbai … Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant	:	Shri Prem Ranjan Kumar, Advocate
For the respondent	:	Shri Prashant Pandey, Legal Consultant
CORAM
SMT. ANANYA RAY	:	MEMBER
JUDGEMENT

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FPA-FE-1241/MUM/2004

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This is an appeal filed by the appellant ShriMoolchand S. Shah @ Choksi against the order in original ADJ222/B/AAO/DS/2004/6375 dated 21.07.2004. Vide the said impugned order, the adjudicating authority levied a penalty of Rs. 35,00,000/- (Rupees thirty five lakhs) on the appellants under Section 9(1)(b) & (d) of FERA, 1973.

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Briefly, the case is that the appellant, a person resident in India, had received and made payments to the tune of Rs. 1,89,73,000/- in India by an order for and on behalf of persons resident outside India without the general or special permission of the Reserve Bank of India during the period

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FPA-FE-1241/MUM/2004

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Page 1 of 5

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1992-93. During the course of investigations conducted by the Bombay Police in the Bombay bomb blast case of 1993 it was found that Shri Moolchand Shah was involved in illicit monitory dealings with a person named Tiger Memon and the latter‟s agent in India. Accordingly, the appellant was arrested under TADA 1987 and his statement was also recorded by the officers of Mumbai Police. Based on these statements and the statements given before the ED officials in October, 1994 under the provisions of FERA, the adjudicating authority has found him guilty of various contraventions under the provisions of Section 9(1)(b) & (d) of FERA, 1973 and accordingly he was penalised.

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The following submissions have been made by the appellant in their appeal, their written submissions as well as during the hearing:

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a. That the statements under TADA were taken under threat and coercion which was retracted by the appellant before the designated judge under TADA for Greater Bombay. That he was tortured which is also recorded in the Roznama dated 26.05.1993 in the Bombay City Civil & Sessions Court, Greater Bombay. Hence, his statement cannot be held as evidence against him.

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b. That in his statements even before the ED officials, he has nowhere accepted his involvement in the monitory dealings with Tiger Memon.

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c. That the department/ED has nowhere given any evidence that the so called monitory dealing with Tiger Memon was with a person resident outside India. That Tiger Memon at the relevant time was a resident of India.

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d. That the case under FERA hinges only on the issue that he had received/made payments from a person resident outside India but the department has not discharged its obligation to prove the same. That

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FPA-FE-1241/MUM/2004 Page 2 of 5

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this argument was taken before the adjudicating authority in their reply to the show cause notice but the adjudicating authority did not deal with the same.

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e. They relied on the following judgments:

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i. Madras High Court judgment in the case of A.S.M. Abdul

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Wahid vs. Deputy Director, ED &ors. Dated 14.02.1990.

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ii. Madras High Court judgment in the case of K. Shakul Mameed

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vs. Additional Director, ED &Ors. Dated 11.11.1986.

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iii. Madras High Court judgment in the case of K. Narayanaswamy

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vs. DD, ED, Madras; AIR 1983 Madras 53.

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iv. Devendra C. Kothari vs. Director of ED; 2013 (297) E.L.T 462 (ATFE).

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v. Vinod Solanki vs. UOI; 2009 (233) E.L.T 157 (SC).

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In response, the respondent stated;

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a. The statement given before the police officer under TADA can be relied upon as the said statement is given under Section 15 of the TADA,

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b. The adjudication order brings out clearly that it was a hawala transaction which connotes that the money has been coming from abroad.

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c. The retraction was filed only in 1994 much after the date of his statement before the police officer which was acceptedly on 14^th and 16^th , May, 1993. Hence, the statement is a good evidence and can be relied upon. They relied on the following judgments:

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i. K I Pavunny vs. Assistant Collector (Hq. Central Excise Collectorate, Supreme Court of India dated 03.02.1997.

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FPA-FE-1241/MUM/2004

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Page 3 of 5

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ii. The Chairman, SEBI vs. Sriram Mutual Fund & ors., Supreme Court of India dated 23.05.2006.

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iii. High Court of Bombay FERA Appeal No. 8/2012 in the case of Vinod M Chitalia vs. UOI dated 28.03.2012.

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I have examined the case, gone through the records available and also heard both the parties. The offence under FERA, 1973 as per the show cause notice is under Section 9 (1)(b) & (d) which reads as under:

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9(1) “save as may be provided in, and in accordance with any general or special exemption from the provisions of this sub-Section which may be granted conditionally or unconditionally by the Reserve Bank, no person in, or resident in, India shall-

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(a) ……………

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(b) receive, otherwise than through an authorised dealer, any payment by order or on behalf of any person resident outside India;

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(d) make any payment to, or for the credit of, any person by order or on behalf of any person resident outside India;”

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The above shows that the dealings of receipt or making any payment by the person concerned has to be to or from any person resident outside India

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The adjudication order does not deal with this issue at all although the appellant had taken this plea before him. There is nothing in the adjudication order to show that this condition has been satisfied for any action to be taken under FERA. Since this issue needs to be dealt first, in

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FPA-FE-1241/MUM/2004

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order to establish the case under FERA Section 9(1)(b) & (d) I think it is appropriate that the matter is sent back to the original adjudicating authority to deal with this issue specifically and pass a speaking order after hearing the appellant.

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The appeal is therefore allowed by way of remand. Since it is an old case, the adjudicating authority is directed to complete the entire process within a period of four months.

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(Ananya Ray) Member

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New Delhi, 13^th November, 2018

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„A‟

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FPA-FE-1241/MUM/2004

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