Partly allowed

FPA-FE-79/MUM/2010 of Shri Juned Yakub Motiwala v/s The Special Director, Directorate of Enforcement, Mumbai

ATFP8 Mar 2018FPA-FE-79/MUM/2010

Case brief

AI extract

What is this about?

Special Director allowed a partial stay on penalty pre-deposit. Court rejected claim of undue hardship noting appellants had secured loans. Ordered 50% pre-deposit payment.

What did the court decide?

A partial stay of the pre-deposit order, directing payment of fifty percent of the total penalty amount of Rs. 29,00,000/- within sixty days.

FPA-FE-79/MUM/2010 of Shri Juned Yakub Motiwala v/s The… — Company and Corporate | ATFP (2018)

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APPELLATE TRIBUNAL, FOREIGN EXCHANGE MANAGEMENT ACT AT NEW DELHI

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Date of Decision: 08 .03.2018

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FPA-FE-78/MUM/2010
M/s. Baba Rayon Fabrics (P) Ltd.	…	Appellant
Versus
The Special Director, Directorate of Enforcement, Mumbai	…	Respondent
FPA-FE-79/MUM/2010
Shri Juned Yakub Motiwala	…	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 K.I. Vyas, Advocate
For the respondent	:	Mrs. Aagam Kaur, Legal Consultant & Shri Prashant Pandey, Legal Consultant
CORAM
SMT. ANANYA RAY	:	MEMBER
JUDGEMENT

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FPA-FE-78/MUM/2010 & FPA-FE-79/MUM/2010

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The appellant has filed the stay application which was heard on 05.01.2018. The learned counsel for the appellant appearing on behalf of both the appeals pleaded for a stay of the impugned order and stated that they have, both a prima facie case in their favour as well on the ground of undue hardship. Hence he pleaded for a complete stay of the pre-deposit of total amount of Rs. 29,00,000/- in both the appeals i.e. (i) FPA-FE-78/MUM/2010 & FPA-FE-79/MUM/2010 Page 1 of 4

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Page 1 of 4

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M/s. Baba Rayon Fabrics (P) Ltd., Surat (ii) Shri Juned Yakub Motiwala, Director.

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The brief facts of the case is that M/s. Baba Rayon Fabrics (P) Ltd. allegedly acquired and remitted foreign exchange abroad through an Indian bank for making certain imports into India but failed to submit the necessary documentary evidence to the authorized dealers evidencing the import, thus violating the provisions of FEMA.

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The learned counsel for the appellant stated that the financial condition of the company is precarious and they do not have any means to pay the penalty amount and pleaded undue hardship. He further stated that the company is not functioning for more than ten years. He also stated that they have a strong prima facie case. Hence he submitted that a total stay may be granted against the pre-deposit and the appeal be taken up for final hearing. In response the learned counsel for the respondent Smt. Aagam Kaur states that there is no prima facie case in their favour, that they did not submit the required documents proving any legal import, that they should have filed the proof within sixty days which they failed to do and the entire case was initiated on the basis of a complaint received from the Reserve Bank of India. Hence no stay is merited.

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I have given my considered thought to the above submissions and have also gone through the records as placed before me. I agree with the learned counsel for the respondent that it is an argueable case and hence it cannot be stated that they have a prima facie case. With regard to the pleading of ‘undue hardship’ it would be relevant to understand what ‘undue hardship’ means. The Supreme Court in the case of Banaras Values Ltd. vs Commissioner of Central Excise (2006) 13 SCC observed:

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FPA-FE-78/MUM/2010 & FPA-FE-79/MUM/2010

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Page 2 of 4

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“This is a matter within the special knowledge of the applicant for waiver and has to be established by him……………… For a hardship to be „undue‟ is must be shown that this particular burden to observe or perform the requirement is out of proportion to the nature of the requirement itself……………… The word „undue‟ adds something more than just hardship or a hardship is greater than the circumstances warrant.”

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This was followed in many subsequent judgments also.

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I have also seen their balance sheet for the year 2010-11 since the appeal was filed in March 2010 and as per Section 19 (1) of FEMA the appellant shall while filing an appeal deposit the amount of such penalty.

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The balance sheet of the 2010 & 2011 brings out the following facts:

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I. The accumulated losses stand at Rs. 10.93 lakhs as on 31.03.2010, as against the capital of Rs. 2,00,000/-. This has further deteriorated marginally as on 31.03.2011. There is therefore a huge capital erosion.

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II. However, they have taken unsecured loan to the tune of Rs. 84.17 lakhs as on 31.03.2010 which has marginally increased as on 31.03.2011.

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III. In addition, they have given loans/advances to some companies like Rajasthan Petro Synthetics Ltd. and Sanghi Polyster Ltd. to the tune of almost Rs. 65,00,000/- plus interest.

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IV. Almost the same position is reflected in their balance sheet of 2016-17.

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Hence, from the above it is clear that while the company has not been working and there is a capital erosion, nevertheless, they have both given advances/loans and also taken unsecured loans. If they are in a position to secure and give loans, notwithstanding their capital erosion it cannot be said that they have ‘undue hardship’.

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FPA-FE-78/MUM/2010 & FPA-FE-79/MUM/2010

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Page 3 of 4

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The ends of justice would be met if they are directed to pay fifty per cent of the total penalty of Rs. 29,00,000/-. I accordingly order so. This amount may be paid within sixty days from today, failing which, the appeal would be liable to be dismissed as per provisions of FEMA.

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(Ananya Ray) Member

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New Delhi, 08^th , March, 2018

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‘A’

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FPA-FE-78/MUM/2010 & FPA-FE-79/MUM/2010

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