Dismissed

FPA-FE-35/CHN/2014 of Shri a. Natarajan v/s The Special Director Directorate of Enforcement, Chennai

ATFP2 May 2018FPA-FE-35/CHN/2014

Case brief

AI extract

What is this about?

An appeal before the Appellate Tribunal regarding an order imposing penalty and confiscation under the Foreign Exchange Management Act was filed by Shri A. Natarajan against the Directorate of Enforcement. The Tribunal affirmed the impugned order dismissing the appeal.

What did the court decide?

The appeal filed under Section 19 of the Foreign Exchange Management Act, 1999 was dismissed; the impugned order dated 20.05.2014 upholding penalty and confiscation was upheld.

FPA-FE-35/CHN/2014 of Shri a. Natarajan v/s The Special Director… — Cheque Dishonour | ATFP (2018)

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APPELLATE TRIBUNAL, FOREIGN EXCHANGE MANAGEMENT ACT AT NEW DELHI

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Date of Decision:- 02.05.2018

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FPA-FE-35/CHN/2014 Shri A. Natarajan … Appellant Versus The Special Director Directorate of Enforcement, Chennai … Respondent

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Advocates/Authorized Representatives who appeared

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For the appellant : Shri T, Harish Kumar, Advocate Shri Navneet Dugar, Advocate For the respondent : Shri Prashant Pandey, Legal Consultant Ms. Aagam Kaur, Legal Consultant CORAM JUSTICE MANMOHAN SINGH : CHAIRMAN

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JUDGEMENT

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FPA-FE-35/CHN/2014

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The above mentioned appeal has been filed under Section 19 of the Foreign Exchange Management Act, 1999 against order no. JD/KSP/01/CEZO/MDU/2014 dated 20.05.2014 passed by the Joint Director, Directorate of Enforcement, Chennai for Adjudicating Authority under the said Act on the following facts and grounds.

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The case of the complainant is that based on the reliable source of information, the enforcement authority searched Mr. Natarajan’s residence on his presence and also his elder son was present at that moment on 11.12.2010 between 16.45 to 21.00 and seized INR 1,14,55,000/- along with the documents. The statement of Natarajan was also recorded. After producing the appropriate bills, a sum of INR 6,58,000/- was handed over to the elder son of Mr. Natarajan. Apart form this, a sum of INR 3,70,000/- a gift money received during his son’s FPA-FE-35/CHN/2014 Page 1 of 8

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marriage was also returned to Mr. Natarajan. For the remaining amount, Mr. Natarajan was unable to furnish the source of the details at the very same moment. The statement of Mr. Natarajan was recorded in the presence of two independent witnesses in the terms of Section 132 of Income Tax Act 1961. As per the statements recorded by the authorities it was implied that Mr. Natarajan co-ordinate with Mr. Siva of Singapore who used to transfer the money to Mr. Natarajan account and asked Mr. Natarajan to distribute the amount to the persons specified by him as a reciprocal Mr. Natarajan had received a commission violating the foreign exchange management act and Mr. Natarajan failed to explain the source of the income.

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The main grounds of the appeal filed before the Joint Director, the appellant has denied the allegations contained in the show cause notice as well as in the complaint as false. It was alleged by him that he has not violated any rules of Foreign Exchange Management Act. He was falsely implicated in this case and made to suffer for having kept an amount of Rs.1,14,55,000/- (One crore fourteen lakh and fifty five thousand only), for the purpose of investing in real estate business. The Enforcement Officers made him to sign the documents prepared by them keeping Mr. A. Natarajan and his son Mr. Ramachandran under custody and the documents shown in support of the show cause notice against Mr. A. Natarajan are all false and fabricated. A retraction telegram and a letter have been issued by Mr. A. Natarajan denying all the documents signed by him. The details of the accounts for the possession of the seized money has also been furnished to you in his letter dated 18.12.2010. It was explained by Mr. A. Natarajan during the search operation that an amount of 47,97,720/- belonging to his daughter in law Srimathi. R. Bharathi which was the cash balance of her business as on 19.12.2010. An amount of Rs.19,17,000/- belonged to his son which amount was given by FPA-FE-35/CHN/2014 Page 2 of 8

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his father in law for investment in real estate business. Rs.55,72,210/belonged to his son Mr. N. Ramachandran which was the cash balance of his business as 09.12.2010. The possession of all these documents has been certified by the auditor, and income tax returns filed accordingly for the assessment year 2011-12. As such Mr. Natarajan was in possession of duly accounted money got through the source of real estate business and he never involved in any act in violation of the FEMA.

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It is also submitted that the officers who searched Mr. A. Natarajan’s house coerced his son to write that the seized money was the amounts received on behalf of one Mr. Siva. The officers threatened with dire consequences and made Mr. Natarajan and his son who were under their custody throughout the night to prepare and sign the documents against Mr. Natarajan. The documents shown against Mr. A. Natarajan were prepared at the instance of the officers and the signatures obtained were not voluntary. Mr. A. Natarajan does not know anybody in the name of Siva of Singapore and he was made to obey the dictates of the officers. It was admitted by the counsel for the appellant during the course of hearing that a retraction statement was made after long period of time.

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The Learned Joint Director after considering the entire gamut of the matter i.e. facts of the case as well as the evidence in para 6.12 (ix) has come to the following conclusion:-

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6. DISCUSSIONS & FINDINGS

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6.1 I have carefully gone through the case records including relied upon documents, Show Cause Notice dated 09.11.2011 and Complaint dated 03.08.2011 filed under Section 16(3) of FEMA, 1998. I have gone through the written reply dated 19.12.2011 filed by the Noticee, Mr. A. Natarajan. I have also considered other written submissions made by the Noticec and the written submissions dated 12.03.2014 and submissions made by the Advocates on behalf of the Noticee during the personal hearing.

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FPA-FE-35/CHN/2014

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6.2 It is a fact evident from the Mahazar dated 11.12.2010 that the officers of Directorate of Enforcement, Madurai searched the residential premises of Mr. A. Natarajan, on 11.12.2010, which resulted in seizure of Indian currency of Rs.1,14,55,000/- . The search also resulted in seizure of documents in 36 pages containing details of the recipients like name, address, phone number etc., family ration card and passport of Shri Mr. A. Natarajan, three receipts for the jewelery purchased in Singapore, Application for Goods & Service Tax refund filed in Singapore, visiting cards of Mr. A. Natarajan and slips containing addresses of people residing in Singapore which were annexed as Annexure(b) to the complaint dated 03.08.2011 filed under Section 16(3) of FEMA, 1999. Further, I observe that the pages, inter alia, containing name, address and phone number of the recipients which were identified and signed by the persons in Sl. Nos. (ii) to (xxix) were enclosed as Annexure (d) to the Complaint.

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6.3 I find that Mr. A. Natarajan in his voluntary statement given under Section 37 of FEMA, 1999 on 11.12.2010 stated that when he visited Singapore, he came into contract with one Siva @ Sivarajan of Perambalur who asked him (A. Natarajan) if he could make payments to persons in India against his (Siva) receipts of Sing pore Dollars from persons working in Singapore; that after deducting his (Siva) commission, amounts would be sent rhough persons in India which would be delivered to him in his (A. Natarajan) house; that further, he (Siva) informed him that he would pay Rs.1,000/- as salary for every payment of Rs.1 lakh besides transport expenses; that he agreed for the same as he though that it would be useful for his family expenses; that later on from August, 2010 till date, the aforesaid Siva from Singapore sent through various persons to him, amounts ranging from Rs.5 lakhs to Rs.10 lakhs; that on every occasion before sending the amounts, Siva used to contact him over his residential telephone no. 0431-2764455 or in his cell phone No. 9842434445 and would inform about how much amount he had sent and also details of the persons to whom the amounts were to be delivered; that sometimes he used to send the names and addresses of the persons to whom amounts were to be paid, through fax in the shop by name Vaishali Communications situated near his house; that after receiving the money, as informed by him (Siva), he had paid amounts of Rs.5,000/- onwards to persons residing I many places like Thuraiyur, Trichy, Musiri etc., ; that in this manner, he had received Rs.20 lakhs, Rs.20 lakhs, Rs. 10 lakhs and Rs. 15 lakhs I the months of August, 2010, September, 2010, October, 2010 and November, 2010 respectively and subsequently paid those amounts to various persons; that during the first week of December 2010, Siva had sent Rs.20 lakhs through some persons in India to him for making payments and Rs.14,55,000/- was the balance left after making such payments; that further on 8.12.2010 and 9.12.2010, Rs. 40 lakhs and Rs. 60 lakhs were sent by the said Siva through some persons in India, for making such payments; that the said total amount of Rs.1,14,55,000/- was seized by the officers of Enforcement Directorate on 11.12.2010. Thus, his voluntary statement explains in detail, the arrangement he made with Sri Siva of Singapore for

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receipt and distribution of the money illegally and accounts for the amount seized from his premises during the search.

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6.4 With regard to the contention of the Notice that the seized amount was Rs.1,17,80,000/-, it is observed from the Seizure Mahazar drawn by the officers of Enforcement Directorate on 11.12.2010 at the residential premises of Mr. A. Natarajan, enclosed as Annexure (a) to the Complaint, that a total amount of Rs.1,14,55,000/- only was seized in the presence of two independent witnesses. It is also to be noted that for the said seized amount, denomination wise details were specified in the seizure mahazar. Further, the said Seizure Mahazar was drawn in presence of the Notice (Mr. A. Natarajan) and his son, Shri N. Ramachandran who were available at the time of the said search and both of them had signed on the said Mahazar acknowledging the truth of the contents there in and had not disputed the same. Thus the contention that the seized amount was Rs.1,17,80,000/- is without any basis and merits rejection.

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6.5 The contention of the Notice that his statements were recorded by force and threat was duly considered and replied to by the then Deputy Director, Directorate of Enforcement, Chennai vide his letter dated 22.12.2010 wherein he, inter alia, stated that the statement dated 11.12.2010 was written at his residence by his eldest son, Shri N. Ramachandran in his own handwriting in Tamil as stated by the Noticee ( A. Natarajan) in the presence of two independent witnesses; that the said statement was signed by him, his son who wrote the statement on his behalf and also two independent witnesses who were present during the entire proceedings; that the search and seizure operation was carried out by the officers in the presence of two independent witnesses and that the search warrant and mahazar were duly signed by him, his eldest son and two independent witnesses. Further, the contents in his statements were corroborated by the incriminating documents and currency seized from his house and the call records of the Noticee’s mobile phone number and land line number. Further, many details furnished by him in his statement were within exclusive knowledge of the notice. It is also worth mentioning here that in his statement he explained in detail about the receipt of the money from one Siva of Singapore and distribution of the said money to several persons as instructed by Siva and specified that sheets 1-24 recovered from his house were written by him in his own hand writing and contains such details. These details were found to be true on verification with the recipients. Thus, the evidences adduced by the department are corroborating the statements of the Noticee. Accordingly, the contentions made by the Noticee in this regard are found to be baseless and merits rejection.

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6.6 It is seen from the Seizure Mahazar dated 11.12.2010 that amounts of Rs.3,70,000/- and Rs.6,58,000/- were also found in the residence of Noticee but were returned to the Noticee after he offered satisfactory explanation for the source of those funds by producing necessary bills and evidences. In

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FPA-FE-35/CHN/2014

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his statement dated 11.12.2010, the Noticee has categorically stated that besides the seized Indian currency and 36 sheets, there was Rs.6,58,000/- kept in the air bag along with counter foils of receipts of amounts relating to the real estate run by his son Ramachandran in the name of ‘Sri Devi Promoters’ as well as copies of property deeds and therefore Rs.6,58,000/- was not seized; that further a total sum of Rs.3,70,000/- in the denomination of Rs.10 and Rs.100 were available; that the amount was given as gift money in connection with the marriage of his son N. Ashok on 20.10.2010; that he also showed notebook pertaining to the gift money and hence, that amount was not seized. Thus, it is observed that the amount of Rs.1,14,55,000/- was seized only after the Noticee failed to explain the source of funds and could not produce evidence about its legitimate nature. The seizure mahazar was signed by his son and his son also has not raised any objection about the seizure and has not produced any evidence to show that the said amount belongs to his legitimate business. Hence, I find the contentions made by the Noticee that the seized amount belong to his son and his daughter-in-law as devoid of merit and production of documents like balance sheets and profit & loss A/c’s after sometime clearly shows that they are only afterthoughts to escape from the clutches of law and therefore merits rejection.

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6.7 It is also seen that, Shri K. Shanmugamoorthy of Singapore in his letter to Director, Directorate of Enforcement, New Delhi claimed that the documents seized from residence of the Noticee were left by him while he stayed at the residence of the Noticee, during his visit to Trichy. Except a bald statement he has not produced any evidence to that effect. Though given an opportunity to support his claims, Shri K. Shanmugamoorthy neither appeared before the Directorate nor produced any documents to support his claim. Further, the explanation given by Shri A. Natarajan in his voluntary statement dated 11.12.2010 regarding the purpose of Indian currency seized in his residence is corroborated by the documents seized in his residence vide Seizure Mahazar dated 11.12.2010. In his statement dated 11.12.2010, the Noticee has categorically explained that in the 36 sheets seized from his house, sheets nos. 1-24, are containing the names, addresses, telephone numbers etc. which were written by him; that he had also made payments to all the persons except to a few persons in those sheets; that in the said sheets, he noted the amounts to be paid to each of the persons against their names and addresses; that for example 25 denotes Rs.25,000, 21 denotes Rs. 21,000, 60 denotes Rs.60,000 and 16 denotes Rs. 16,000 i.e., three zeros (000) had to be added and read along with the numbers written; that in the said sheets 1-24, recipients of amounts had put their signatures against their addresses while acknowledging the receipt of those amounts; that the relatives of the recipients were working in Singapore; that he had received the amounts sent by Siva and made payments to those persons as per his instructions. During further investigation with the recipients, 28 recipients have stated that they had received the respective amounts noted against each in the related seized documents under instructions from persons residing in Singapore and they have identified their signatures on the

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FPA-FE-35/CHN/2014

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said sheets and stated that they have signed on those sheets as token of receipt of the said amounts. These details were included in the complaint filed itself. Noticee has not refuted these details or statement. In view of the above, I find that the letter dated nil of Shri K. Shanmugamoorthy is only an afterthought and the said claim is to bail out Shri Natarajan from clutches of the law. Accordingly, no credence can be given to the letter dated nil of Shri K. Shanmugamoorthy and his claim merits rejection.

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6.8 It is observed from the call records of the land line number of the Noticee, enclosed as Annexure (h) of the complaint, that calls were received from Singapore regular basis and the voluntary statement of Shri A. Natarajan explains these facts. I find no force in the contentions of the Noticee that several persons who attended his son’s marriage used his cell phone and residential land line to talk. It is observed from the call records of mobile number of the Noticee, enclosed as Annexure(g) to the complaint, the he called those numbers which were reflected as the mobile numbers of the recipients in the documents seized from the residence of the Noticee on 11.12.2010. Further, the seizure of Indian currency and indiscriminating documents from the residence of Noticee in the presence of independent witnesses is corroborative evidence against him. In addition, the statements of Noticee explained the source and purpose of the seized currency. Further, the same were corroborated by the call records of the cell phone and land line numbers of the Noticee. In view of all these material evidences against him, no credence can be given to above contentions of the Noticee and I find that these are only an afterthought to escape from the clutches of law and thus merit rejection.

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6.9 It is seen that statements were recorded from 28 persons whose names and addresses were available in the documents seized from the residence of Shri A. Natarajan. It is observed that they admitted to have received money in India on instructions from their family members who were working abroad and that they have also identified their signatures put by them in the seized documents as an acknowledgement. Hence, it is clear that the recipients have received payments in India on instructions from persons outside India through Shri A. Natarajan. It is also observed that all the information available in the seized documents viz., name, address, phone number, amount received and signature of the recipient was corroborated by the statements recorded from 28 recipients and no recipient has stated anything contrary to the information available in the seized documents. It also evidences the fact that Shri A.Natarajan has received money from various persons in India on instructions from Shri Siva of Singapore and has made

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FPA-FE-35/CHN/2014

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corresponding payments to various persons in India on instructions from Shri Siva of 'Singapore.

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6.10. It emanates from the statements of the Noticee and other evidences on record that the Noticee, Shri A.Natarajan, a citizen of India and a person resident in India, without the general or special permission of the Reserve Bank of India, has received Rs.1,85,00,000/- (Rs.20 lakhs in August 2010, Rs.20 lakhs in September 2010, Rs.10 lakhs in October 2010, Rs. 15 lakhs in November 2010 and Rs 120 lakhs in December, 2010) otherwise through an authorised persons in India, by order or on behalf of Shri Siva of Singapore, a person resident outside India, and paid Rs.69,72,250/- on instructions from Shri Siva of Singapore i.e., to or for the credit of a person resident outside India and got Rs. 72,750/- as his commission and the remaining amount of Rs. 1,14,55,000/- which is yet to be distributed at the instructions of Siva of Singapore was seized during the search operation conducted by the department on 11.12.2010.

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6.11 In view of the above discussions and findings, I hold the Noticee guilty of the contravention of the provisions of Section 3(c) and 3(b) of FEMA, 1999 involving amounts of Rs.1,85,00,000/- and Rs.69,72,250/- respectively and thus liable for penalty under section 13(1) of FEMA, 1999. I find that the seized amount of Rs.l,14,55,000/- was involved in the contravention of Section 3(c) of FEMA, 1999 and thus the same is liable for confiscation under Section 13(2) of FEMA, 1999. Accordingly I proceed to pass the following order.

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I have carefully gone through the impugned order and material placed by the appellant. It appears that the Trial Court has discussed and dealt with each and every aspect of the matter, thus, the chances of interference are almost nil unless the finding arrived in the order passed by the Trial Court is perversed and against the law. The said position is not available in the facts of present case.

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Therefore, I am of the considered view that the impugned order does not suffer from any informative. Accordingly, the appeal is dismissed.

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(Justice Manmohan Singh) Chairman

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New Delhi, 2nd May, 2018 ‘skb’

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FPA-FE-35/CHN/2014

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FPA-FE-35/CHN/2014 of Shri a. Natarajan v/s The Special Director Directorate of Enforcement, Chennai

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