Allowed

FPA-FE-54/LKW/2014 of Shri Dr. D. Rewatha Thera v/s The Joint Director Directorate of Enforcement, Lucknow

ATFP23 Jan 2019FPA-FE-54/LKW/2014

Case brief

AI extract

What is this about?

The Tribunal allowed appeals against penalty and confiscation orders under FEMA. It held that holding inherited foreign funds due to inability to repatriate (pending Home Ministry approval) did not violate FEMA. Confiscation was set aside as unjustified without notice. No opinion was expressed on the funds retention.

What did the court decide?

Appeals allowed; impugned order dated 29.05.2014 set aside. No direction regarding foreign funds retained abroad.

FPA-FE-54/LKW/2014 of Shri Dr. D. Rewatha Thera v/s The… — Writ and Judicial Review | ATFP (2019)

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

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Date of decision: 23.01.2019

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1. FPA-FE-54/LKW/2014

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Shri Dr. D. Rewatha Thera … Appellant

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Versus The Joint Director Directorate of Enforcement, Lucknow … Respondent

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2. FPA-FE-55/LKW/2014 M/s. Maha Bodhi Society of India … Appellant Versus The Joint Director Directorate of Enforcement, Lucknow … Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellant No. 1 : Mr. Shakti K. Pattanaik, Advocate For the Appellant No. 2 : Mr. Mukesh Gupta, Advocate For the Respondent : Mrs. Aagam Kaur, Legal Consultant Mr. Prashant Pandey, Legal Consultant

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CORAM JUSTICE MANMOHAN SINGH : CHAIRMAN

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JUDGMENT

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FPA-FE-54/LKW/2014 & FPA-FE-55/LKW/2014

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By this order, I propose to decide the above mentioned appeals filed against the order dated 29.05.2014 passed u/s 13 of the Act for violating the provisions of section 4 of the Foreign Exchange Management Act, 1999 and Regulation 3 of the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000.

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2. The operating part of the order reproduced hereunder:

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ORDER

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In view of above, I impose a penalty of Rs. 1,00,00,000/- (Rupees One Crore) on Mahabodhi Society of India and Rs. 50,00,000/- (Rupees Fifty Lakhs) on Dr. D.R. Thereto in terms of Section 13(1) of the Foreign Exchange Management Act, 1999.

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I direct the noticees to bring back into India the foreign exchange of Sri Lankan Rupees 4,70,09,728/- held in Sri Lanka and UKP 5216.50 held in U.K. in terms of section 13(2) of the Foreign Exchange Management Act, 1999 and further order for confiscation of said amount of Sri Lankan Rupees 4,70,09,728/- presently available in the form of Treasury Bill with Bank of Ceylon, Colombo, Sri Lanka and UKP 5216.50 available with Courtts & Co. U.K., once it is repatriated.

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The total amount of penalty of Rs. 1,50,00,000/(Rupees One Crore Fifty Lakhs) imposed on the noticees and the amount so confiscated should be deposited in the office of the Joint Director, Directorate of Enforcement, Lucknow Zonal Office, 2^nd Floor, Princeton Business Park, 16 Ashok Marg, Lucknow-226001 in the form of Demand Draft drawn in favour of the Drawing and Disbursing Officer, Directorate of Enforcement, Lucknow Zonal Office, Lucknow, within 45 days of receipt of this order.

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The background about the Maha Bodhi Society of India and the facts taken in appeal no. 54/2014 are that:

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a) The Maha Bodhi Society of India was established in the year 1891 by a Sri Lankan Buddhist Monk to preserve and develop Buddhist places in India. An amount of UKP 1,75,000/- was donated by the will dated 06.12.1956 of Late Miss Grace C. Lousbery and Late Madam Marguerite-La-Fuente’s in favour of the Maha Bodhi Society of India.

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b) The society was subject to Maha Bodhi Society of India alteration in Rule Recorded on 15.11.1992 and the said rule broadly prescribes decision by majority and as General Secretary the appellant was duty bound to carry out the decision of governing council.

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c) The appellant was appointed as a general secretary of the said society in the year 1985 and was continuing in the said capacity till September, 2013. As Buddist Bhiku (Monk) he was receiving an

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honorarium of INR 2,000/- till August 2013 and according to him, he was following the rules and regulation of the society.

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d) The Mahah Bodhi Society of India used to receive contribution/donation from pilgrims, institution, association worldwide for propagating and developing Buddhism since its inception. The activities of the Maha Bodhi Society of India are dependent on donations/charities made by foreign pilgrims.

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e) Its activities include resurrection and restoration of holy places like MulagandhKuti Vihar, Sarnath, Lumbini, Sanchi, Kushinagar, Bodhgaya. The society has Buddhagaya Centre, Sarnath Centre, Lucknow Centre, New Delhi Centre, Lumbini Centre, Bhubaneswar Centre, Mumbai Centre, Shravasti Centre, Nowgarh Centre, Chennai Centre, Sanchi Centre located in India and overseas branches located in Japan, Korea, Hong Kong, England, America etc.

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f) The society publishes four journals i.e. The Mahabodhi (in English), Dharmadoot (In Hindi), Sambodhi (in Hindi), Kanlinga (in Oriya & English). These places of high religious and historical importance for Buddhism were continuously maintained by the Maha Bodhi Society of India. The society has participated in the restoration of these places and has incurred expenses in core of rupees.

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g) The more than 99% of the society immediately after promulgation of the Foreign Contribution (Regulation) amendment ordinance in 1984, applied to the Government of India for registration, the society kept on following up the matter with the concerned authorities and it was in the year 1995 it was advised to make a fresh application.

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h) Subsequently, Shri U.N. Chaturvedi, Asst. Director carried an inspection of the society’s books of account. On completion of the inspection, Shri Chaturvedi asked for some additional information as the society failed to provide those documents an Order under Section

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10(a) and 12 of the Foreign Contribution (Regulations) Act 1984 was initiated and the same was followed by initiation of Court proceeding by CBI. The enquiry resulted in a court case titled CBI Vs. Maha Bodhi Society of India and others (RC/AC/9/2000 A 001 U/S 6 &13 of the FCRA Act).

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i) Thereafter the Government of India, in exercise of the power vested under Section 12 of the Foreign Contribution (Regulation Act) 1976 passed an order bearing Number: 11/21022/52(1)/98 FCRA-II (MU) dated 01.12.1999 prohibiting the society and all its branches from paying, delivering & transferring any foreign contribution till further order.

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j) Against the order dated 01.12.1999, the Maha Bodhi Society of India made representation to the appropriate authority and accordingly vide order dated 05.07.2000 the appropriate authority allowed the society to draw funds amounting to Rs. 3.61 Lacs from its frozen Bank Account to meet the expenditure of Calcutta, Sarnath, Bodhgaya, New Delhi & Bhubaneswar Centre.

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k) By order No. 11/21022/52(1)98 FCRA-II (MU) dated 26.03.2002 the appropriate authority allowed the Maha Bodhi Society of India including its branches and its unit to accept Foreign contribution upto Rs. 5 Lacs per month beginning from the year 2002-2003, subject to the condition that monthly limit of utilization of funds continues to be Rs. 3.61 Lacs for various centre as stipulated in order dated 05.07.2000. It was also provided that the relaxation would continue till the ongoing court case filed by the CBI Vs. Maha Bodhi Society of India & Others. Copy of the order dated 26.03.2002 is annexed herewith as Annexure-6.

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l) On 05.12.2003 the case titled CBI Vs Maha Bodhi Society of India & Ors was decided by the Hon’ble Court of Ms. Reena Singh Nath and the Maha Bodhi Society was imposed a fine of Rs. 50,000/- and the fine was duly deposited.

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l) The matter remaining thus the senior trust service office of Couts & Co. Mr. Steve Welham approached the Maha Bodhi Society of India to transfer UKP 1,75,000/- to the account of Maha Bodhi Society of India, in consonance and pursuant to the will dated 06.12.1956 of Late Miss Grace C. Lousbery and Late Madam Marguerite-La Fuent’s in favour of the Maha Bodhi Society of India. The letter dated 11.09.06 and 07.10.06 written by the Senior Trust Officer in this regard are filed as Annexure - 7 Colly.

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m) Pending registration under Foreign Contribution Regulation Act 1976 the fund arising out of the gift deed dated 06.12.1956, was instructed to be transferred to the account of the Society located in Sri Lanka and the said amount of UKP 1,75,000 was credited to the account of the society with the Bank of Ceylon. The instruction was issued on the bonafide belief that there was no restriction in transferring funds to the account of the Maha Bodhi Society located in Sri Lanka and there is no restriction of using the foreign fund outside India.

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On 01.09.2009, the Assistant Director, Directorate of Enforcement instituted a complaint under section 16(3) of the Foreign Exchange Management Act 1999 against the Maha Bodhi Society of India and the present appellant. The said complaint was instituted on the basis of information received from on Mr. Rana.

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On 22.10.2009 the Director of Enforcement Foreign Exchange Management Act issued SCN/T-4/LZO/2009. The Maha Bodhi Society, in response to the said show cause notice submitted an interim reply dated 28.03.2011 praying dismissal of the complaint. Thereafter, written submission dated 10.02.2013 was submitted by the society acting through its lawyer. The Impugned order was passed on 29.05.2014 which is challenged by filing of two appeals before us.

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As per appellant, in the month of September, 2013 the appellant herein tendered his resignation from the post of General Secretary of Maha Bodhi Society of India and at present is engaged the service of Lord Buddha as a Bhiku i.e. beggar or one who lives by alms.

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It is not disputed by the counsel for the respondent that two Foreign Nationals of London, U.K known as Grace Constant Lounsbery and Marguerite La Fuente has executed a WILL on 6/12/1956 in favour of the appellant. As per the deed, the settlors have transferred certain securities in favour of M/s. Coutts And Company known as Bank as trustee with a direction to transfer the value of securities to the appellant after the death of the settlers. The settlers died on 26/06/1994, as such after the death of the settlers by virtue of this settlement deed the appellant became entitled to inherit the foreign exchange to the tune of 1,75,000 UK pound.

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It is the admitted position that the Trustee requested the appellant to furnish their bank account details etc. for transferring this amount to their bank account as per the Will of the settlers and the society vide order dated 01^st December, 1999 was prohibited from paying, delivering, transferring or otherwise dealing with, in any manner whatsoever the amount of foreign contribution lying with the society under section 12 of the Foreign Contribution Regulation Act, 1976. Later on, the society vide order dated 26^th

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March, 2002 was permitted to accept foreign contribution upto a ceiling of Rs. 5 Lakhs (Rupees Five Lakh) per month i.e Rs. 60 Lakh (Rupees sixty lakh) per annum, beginning from the year 2002-03, subject to the condition that the monthly limit of utilization of funds shall continue to remain Rs. 3.61 lakh for its various centers.

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It is also a matter of fact that the society moved an application on 24/10/2005 in the office of the Ministry of Home Affairs at New Delhi (which is at page no. 27-35 of the paper book) for obtaining prior permission of the Central Government under the Foreign Contribution (Regulation) Act, 1976 for acceptance of foreign contribution because the society was prohibited from accepting foreign contribution.

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A fund of 1,64,465.18 in Pound-sterling is to be transferred to Maha Bodhi Society of India from the late Miss Grace Lounsberry & the late Madame Marquerite La Fuente’s settlement to be utilized for 2550^th Buddha Jayanti in 2006. Letter dt. 26^th August, 2005 from Coutts & Co., Trustee Department, P.O Box 1236, 6 High Street, Chelmsford, Essex CMI 1BQ and London are filed .

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It is the case of appellant that it waited for permission to this effect but no permission was granted by the Ministry of Home Affairs for the repatriation of this amount. As such, the Governing body of the society decided to realize this amount and park these fund to their another bank account at Bank of Ceylon, Colombo, Sri Lanka, till the Home Ministry, Government of India grants the permission. The appellant instructed the trustee to transfer this amount to their bank account bearing No. 06185854 maintained with Bank of Ceylon, Colombo, Sri Lanka. This amount was transferred to the bank account of the appellant at Sri Lanka on 09/02/2007.

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However, one Mr. Rajpal Rana, ex-managing trustee of the society lodged a complaint against the appellant that the appellant has got transferred an amount of 1,75,000 UKP to their bank account maintained outside India in contravention of the provision of FEMA,1999.

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On the basis of this complaint, a show cause notice Dt. 22/10/2009 was issued to the appellant for contravening the provision of section 4 of the Act for holding Foreign Exchange outside India.

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Section 4 of the Act reads as under :-

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Save as otherwise provide in this Act, no person resident in India shall acquire, hold, own, possess or transfer any foreign exchange, foreign security or any immovable property situated outside India.

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Section 6(4) of the Act reads as under :-

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A Person resident in India may hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India or inherited from a person who was resident outside India.

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The section provides that a person resident in India may hold foreign currency outside India if such currency was inherited by a person resident in India from a person who was resident outside India.

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It is an undisputed position of facts that the appellant is a society Incorporated in India, as such, is a person resident in India as per section 2(v)(ii) of the Act. The settlers of the voluntary settlement deed were foreign national and were person resident outside India as per section 2(w) of the Act. The voluntary settlement deed though executed in England as per the laws of that country is in the nature of Will because it fulfills all the essential ingredients of a Will. The voluntary settlement deed was executed voluntarily by the settlers, it was revocable during the life time of the settlers and the

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property under consideration was to be transferred to the beneficiary after the death of the settlers.

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There is no dispute that the appellant being a person resident in India has inherited this amount as per the voluntary settlement deed executed by the settlers being person resident outside India.

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As per settled law, the word inheritance has to be given a wider meaning here. The word inheritance here cannot be limited to mean the asset acquired by a Human being/ natural person upon the death of a natural person because as per section 2(v) of the Act a ‘person resident in India’ includes a legal person. Thus, the property passing upon death of a person being resident outside India to a person resident in India whether the person resident in India is a natural or a legal person.

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Section 9 of the Act provides as under:-

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Exemption from realization and repatriation in certain cases. The provisions of sections 4 and 8 shall not apply to the following, namely:-

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a) ------------

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b) ------------

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c) ------------

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d) ------------

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e) Foreign exchange acquired from employment, business, trade, vocation, services, honorarium, gifts, inheritance or any other legitimate means upto such limit as the Reserve bank may specify,

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f) ------------

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As per Section 9(e) of the Act also if the foreign exchange has been acquired by way of gift or inheritance then even in that situation the provision of section 4 shall not apply. The reserve bank has not prescribed any limit for holding the foreign exchange in case the foreign exchange has been acquired by gift or inheritance.

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Section 6(4) and section 9 contains certain exceptions which provides otherwise to section 4.

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Then even if for a moment assuming that the provision of section 6(4) and section 9(d), (e) of the Act are not applicable in the instant case even than the appellant should not be held guilty for contravening the provisions of section 4 of the Act because of the following reasons:-

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a) Undisputedly, the Foreign Exchange was acquired on 09/02/2007. The appellant has moved an application on 24/10/2005 in the office of Ministry of Home Affairs i.e. much prior to the realization of this amount for granting permission for the repatriation of this amount. If the Ministry of Home Affairs would have granted the permission then the society would have repatriated this amount to India and have sold it to Reserve Bank of India. No material has been produced contrary to that. Thus, there was no malafide intention in holding the foreign exchange abroad India.

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b) It is undisputed fact that even till date, after passing of the order, the Ministry of Home Affairs has not granted permission for the repatriation of this amount to India. The society has again and again moved an application to this effect. Evidence to this regard is already available in record.

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c) Regulation 3 of The Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 provides that if a person resident in India to whom any amount of foreign exchange is due or has accrued shall take all reasonable steps to realize and repatriate to India such foreign exchange and shall in no case do or refrain from doing anything which has the effect of securing-

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(i) The receipt by a person of the whole or part of that foreign exchange is delayed ; or

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(ii) The foreign exchange ceases in whole or in part to be receivable by him.

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d) If the appellant would not have realized the amount and keep on waiting for permission to this effect from Home Ministry then either the receipt of the foreign exchange would have delayed or the trustee would have transferred this amount to some other person as per the laws of their country. In that situation there would have been violation of regulation 3 of the Foreign Exchange Management (Realization, Repatriation and Surrender of Foreign Exchange) Regulations, 2000. Such situation has not happened. The entire amount was withdrawn by the applicant.

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By transferring these funds in Ceylon and by making various application to the Home Ministry for granting permission for repatriation of this amount, the appellant have taken all reasonable steps to realize and repatriate the foreign currency in India but the amount could not be repatriated to India because the Home Ministry did not granted the permission for the repatriation of the foreign exchange to India.

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If the appellant would have directed the trustee to transfer this amount to bank account maintained in India then may be there would have been no violation of section 4 of Foreign Exchange Management Act, 1999 and regulation 3 of the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000.

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e) The complainant has not lodged a complaint against the appellant before the Central Government for accepting or having in control foreign exchange in violation of the provisions of the Foreign Contribution (Regulation) Act, 1976 then Central Government may take action under section 12 of the Foreign Contribution (Regulation) Act, 1976 and also under section 7 of the Unlawful Activities (Prevention) Act, 1967, the provisions of which are more stringent then the action that have been taken under section 13 of the Foreign Exchange Management Act, 1999.

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Admitted position is that the Home Ministry didn’t granted permission for the repatriation of this amount in India then later on penalized the appellant for not repatriating this amount to India.

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Considering the above facts the appellant should not be considered to have violated the provisions of section 4 of the Act and Regulation 3 of the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 in view of peculiar facts and circumstances of the present matter.

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By holding in the impugned order that the foreign exchange outside India the appellant has neither acted deliberately in defiance of law nor in conscious disregards of its obligation as it was held by Hon’ble Supreme Court

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in the case of Hindustan Steel Ltd. Vs State of Orissa (1972) 83 ITR 26(SC) that even if a minimum penalty is prescribed, the authority to impose the penalty will be justified in refusing to impose the penalty, when there is a technical or venial breach of the provision of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statue. Thus, the penalty levied is excessive and unreasonable having regard to the facts of the case.

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The Adjudicating Authority have mentioned in the order that the Sri Lankan rupees now in the form of treasury bills with the Bank of Ceylon, Colombo, Sri Lanka is liable to be brought into India and is also liable for confiscation in favour of the Central Government in terms of section 13 (2) of FEMA, 1999 after the repatriation into India. The Adjudicating Authority has passed the order for confiscation without issuing any show cause notice for the same. The principle of natural justice has been totally violated. The Adjudicating Authority has passed the order for confiscation as a matter of course without considering the totality of the facts of the case and by without giving any justification for the same.

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The nature of this transaction i.e. the Realisation of the foreign exchange as per the Will of the foreign national being resident outside India doesn’t spell any conscious wrong doing on the part of the appellant. The possession of foreign exchange was neither unlawful nor has remained unexplained. The appellant before realization of this amount outside India has requested to grant permission for the repatriation of this amount to India. The said request of the appellant is to be determined as per law.

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It was held in the case of CP Devasay Vs. Directorate of Enforcement (1998) 41 Taxman 39 (FERAB) and in the case of Dr. V. G. Joseph Vs. Additional Director (2004) 52 SCL 530 (ATFE) that in such circumstances the

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order for confiscation is unjustified. The finding in this regard are against the law and facts and circumstances of the present matters. The order for confiscation is based on assumptions and suppositions. No cogent reasons has been given for passing the order. It was held in the case of Abdul Razak Haji Ismail Vs. Director (2004) 51 SCL 337 (Bom) that the power of confiscation being panel in nature must be exercised for having cogent and clear evidence. The order for confiscation cannot be inferred by implication and the power to confiscate cannot be assumed on the basis of assumptions and suppositions.

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In the light of above, I allow both the appeals and set-aside the impugned order dated 29^th May, 2014 against the appellants. However, this Tribunal does not wish to express any opinion or to pass any direction with regard to amount lying in foreign land. The appellant is at liberty to initiate the proceedings in that regard as per law as this Tribunal has no jurisdiction to pass any such direction.

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24. No costs.

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(Justice Manmohan Singh) Chairman

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New Delhi, 23^rd January, 2019

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‘skb’

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