Allowed

RP-FE-08/CHD/2015 of The Joint Director, Directorate of Enforcement, Chandigarh v/s Shri Ajit Singh

ATFP3 Aug 2018RP-FE-08/CHD/2015

Case brief

AI extract

What is this about?

The Tribunal held that an adjudicating authority cannot appropriate unfrozen bank deposits or fixed deposits towards a penalty unless the amounts are first confiscated. Since the authority released the principal amount without confiscating it, the appropriation for penalty was illegal. The appeal was allowed, reviewing dismissed.

What did the court decide?

The appeal regarding penalty adjustment from unfrozen funds is allowed; the review petition is dismissed.

RP-FE-08/CHD/2015 of The Joint Director, Directorate of… — Banking and Recovery | ATFP (2018)

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

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DATE OF DECISION: 03.08.2018

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MP-FE-253/CHD/2018 (Stay) & FPA-FE-67/CHD/2014 Shri Ajit Singh Sandhu & Ors. … Appellants Versus The Joint Director, … Respondent Directorate of Enforcement, Chandigarh & RP-FE-08/CHD/2015 The Joint Director, … Appellant Directorate of Enforcement, Chandigarh Versus Shri Ajit Singh … Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellants : Shri Shiv Shekhri, Advocate & Shri Ashish Shekhri, Advocate For the Respondent : Shri Prashant Pandey, Legal Consultant & Smt. Aagam Kaur, Legal Consultant

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CORAM SMT. ANANYA RAY : MEMBER

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JUDGEMENT

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MP-FE-253/CHD/2018 (Stay)

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Both the parties agreed during the hearing on 27.07.2018 that it was infructuous since the penalty amount has already been adjusted/recovered in the impugned order itself. I hold so.

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FPA-FE-67/CHD/2014 & RP-FE-08/CHD/2015

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Page 1 of 5

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FPA-FE-67/CHD/2014 & RP-FE-08/CHD/2015

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An appeal has been filed by Shri Ajit Singh Sandhu against the order passed by the Joint Director of Enforcement Directorate (ED), Order No. JD/JL/03/2014/GB dated 19.08.2014. A review petition has also been filed by the Enforcement Directorate (ED) under Section 19 (6) of FEMA, 1999 against the same adjudication order. Briefly the case is, that a raid was conducted in the residence of Shri Ajit Singh Sandhu under Section 37 of FEMA wherein same documents and foreign currency of Euro 3525 and US Dollar 1251 was recovered which was duly seized. In a statement dated 14.03.2013, Shri Singh inter alia stated that he had six sons who were residing in Philippines for many years, that he was doing farming on his agriculture land in his village in India, that in November 2012 he received Rs. 29,00, 000/- (Rupees twenty nine lakhs only) in cash on instructions from his son residing in Philippines, that he deposited the said amount with the Capital Local Area bank, Mehatpur in his son‟s account, that he had also prior to this deposited a total amount of Rs. 53,70,000/- (Rupees fifty three lakhs seventy thousand only) in the account of his son (Rajinder Singh) residing in Philippines during the period September 2012 to November, 2012. That out of the Rs. 29,00,000/- (Rupees twenty nine lakh only) received in November, 2012, he had made FDR of Rs. 10,00,000/(Rupees ten lakh only) and paid earnest money of Rs. 5,00,000/- (Rupees five lakhs only) towards purchase of a plot in Nakodkar Road, Mehatpur. That till date, he had spent Rs. 50,00,000/- (Rupees fifty lakh only) towards construction of two storey joint house of his sons who were residing in Philippines, all of which was paid from the above receipts. With regard to the foreign currencies seized during the raid, he stated that these were given to him by his sons and daughter-in-law when they visited India.

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FPA-FE-67/CHD/2014 & RP-FE-08/CHD/2015

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Page 2 of 5

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The ED had instructed the Branch Manager, Oriental Bank of Commerce, Mehatpur not to allow the encashment of the FDR of Rs. 10,00,000/- (Rupees ten lakh only). They had also instructed the Branch Manager, Capital Local Area Bank Ltd., Mehatpur, Jalandhar not to allow any withdrawal from the bank account in the name of Mr. Rajinder Singh (his son) which on that day i.e. on 14.03.2013 was Rs. 72,81,082.19 (Rupees seventy two lakhs eighty one thousand eighty two and nineteen paise).

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The allegation is that all this money have been received from persons in India, other than through an authorised banking channel/dealer as prescribed by the RBI from time to time. The adjudication order imposed the following penalties:

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a. Rs. 50 lacs for contravention of Section 3(c) of FEMA

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b. Penalty of Rs. 30 lacs for contravention of Section 3 (b) of FEMA

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c. Penalty of Rs. 1 lakh for contravention of Section 3(a) of FEMA.

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The adjudicating authority, however, withdrew the directions of freezing the bank account, as discussed at para 2 above, and did not order for its confiscation. He also did not order any confiscation of the FDR. However, he adjusted the total penalty of Rs. 81,00,000 (Rupees eighty one lakhs only) from this amount which was lying in the bank as well as the FDR. He also appropriated the interest on the frozen amount of Rs. 72,81,032 and the FDR of Rs. 10,00,000/- (Rupees ten lakh only).

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The appellants have stated that even without going into the merits of the case, the adjudication order is blatantly wrong and illegal. The amount frozen in the bank, both lying in the account as well as the FDR, could not have been appropriated for adjusting the penalty amount since it was the

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FPA-FE-67/CHD/2014 Page 3 of 5 & RP-FE-08/CHD/2015

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appellant/appellant son‟s money and was neither confiscated nor forfeited by the ED to the Central Government under any provisions of law. Adjusting/appropriation for any penalty etc. levied by the Central Government can only be done after a proper order on its confiscation or forfeiting to the Central Government, is passed.

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In response, the respondents have stated that they agreed with this contention and accordingly they have filed a review petition under Section 19(6) of FEMA.

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I have examined the case and also all the documents placed on record. I have also heard both the parties. The adjudicating authority vide the impugned order, ordered for adjustment of penalty of Rs. 81,00,000/(Rupees eighty one lacs only) from the frozen amount of Rs. 72,81,08.19 (Rupees seventy two lakh eighty one thousand eighty two and nineteen paise) and FDR of Rs. 10,00,000/- (Rupees ten lakh only). At no point of time, did the Enforcement Directorate either seize them or confiscate them so that they could be forfeited to the Central Government. The adjudicating authority has released these amounts from being frozen, by not confiscating them. This money belongs to the appellant/his son, and while directions for freezing was only a temporary measure, the adjudicating authority should have passed appropriate order of either releasing them or confiscating them. But he has mentioned that he is not confiscating them, meaning thereby that he is releasing them. Once no confiscation order has been passed it is not clear under which provisions of law the said amount was appropriated towards the penalty amount. Without going into the maintainability of the review petition under Section 19 (6), I do not find any merit in the review petition wherein they have prayed that the review petition may be allowed by modifying the impugned order to the extent that the principal amount

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FPA-FE-67/CHD/2014 & RP-FE-08/CHD/2015

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Page 4 of 5

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should be confiscated (interest accrued has been appropriated to the Central Government by the impugned order). I find merits in the appeal that this is a blatantly illegal order in as much as appropriation has been ordered of the money which has been released/not confiscated by the adjudicating authority himself. Once the principal amount is released, the question of allowing the “interest accrued on the blocked amount and FDR be credited to the Central Government” (to use the language in the impugned order) does not arise. Accordingly, I allow the appeal and reject the review petition and dismiss it.

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(Ananya Ray) Member

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New Delhi, 3^rd August, 2018

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„A‟

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& RP-FE-08/CHD/2015

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FPA-FE-67/CHD/2014

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Page 5 of 5

RP-FE-08/CHD/2015 of The Joint Director, Directorate of Enforcement, Chandigarh v/s Shri Ajit Singh

Case brief

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RP-FE-08/CHD/2015 of The Joint Director, Directorate of Enforcement, Chandigarh v/s Shri Ajit Singh

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