FPA-FE-960/MUM/2008 of Shri D.P. Agarwal v/s The Special Director, Directorate of Enforcement, Mumbai

ATFP6 Aug 2019FPA-FE-960/MUM/2008

Case brief

AI extract

What is this about?

This single-member bench examined a stay petition challenging an order implicating appellants in FEMA violations. Finding no prima facie documentary evidence to conclusively prove charges of round-tripping funds or establish the actual source of funds at this stage, the member stayed the pre-deposit requirement.

What did the court decide?

Stayed the pre-deposit requirement pending the final hearing of the case.

FPA-FE-960/MUM/2008 of Shri D.P. Agarwal v/s The Special… — Company and Corporate | ATFP (2019)

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

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DATE OF DECISION: 06.08.2019

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1. MP-FE-440/MUM/2019 (Misc.) MP-FE-344/MUM/2018 (Stay) FPA-FE-957/MUM/2008
M/s. Vedanta Ltd.	… Appellant
2. MP-FE-345/MUM/2018 (Stay) FPA-FE-958/MUM/2008
Shri Anil Agarwal	… Appellant
3. MP-FE-346/MUM/2018 (Stay) FPA-FE-959/MUM/2008
Shri Navin Agarwal	… Appellant
4. MP-FE-347/MUM/2018 (Stay) FPA-FE-960/MUM/2008
Shri D.P. Agarwal	… 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 Appellants : Shri R.S. Gill, Advocate Shri Mohd. Saqib, Advocate For the Respondent : Shri Prashant Pandey, Legal Consultant CORAM SMT. ANANYA RAY : MEMBER JUDGMENT

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FPA-FE-957-960/MUM/2008

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Four appeals have been filed by the above appellants against the impugned order SDE/SKP/III/170/2004 dated 03.08.2004. Presently, the stay petitions are before this Bench. The appellants were charged for contravention of Section 8(1) of FERA, 1973 for acquiring and transferring

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FPA-FE-957-960/MUM/2008

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foreign exchange equivalent to Rs. 208 crores without the prior general or special permission of the RBI. The Directors were charged under Section 68(1) of FERA, 1973. Both the parties were heard at length on the stay petition.

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The learned counsel for the appellant stated that the allegation in the connected show cause notice was that M/s. Twinstar Holding Limited (hereinafter referred to as ‘THL’) an offshore company registered in Mauritius had invested Rs. 208 crores during the period 1993 to 1999 into the Indian companies of M/s. Sterlite Industries (India) Limited and four other companies and that since M/s. THL was having a capital of only US$ 100, the source of funding by THL was held to be a suspect. He also stated that the entire case is based on allegations against M/s. THL but not against the noticees and that no show cause notice or any other proceedings were held against M/s. THL. In such a situation holding the present appellant company and its Directors liable for action under FERA is blatantly illegal and wrong.

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In response, the learned counsel for the respondent stated that it was a clear case of round tripping of funds whereby funds were remitted from the appellant company i.e. M/s. Sterlite Industries (India) Limited to M/S. THL, Mauritius and then the same money was remitted back by M/s. THL, Mauritius into M/s. Sterlite and other four companies. That M/s. THL did not have the wherewithal to invest Rs. 208 crores since their capital was of only 100 US$. Moreover, the very fact that some of the Directors of M/s. Sterlite Industries (India) Limited are Directors in THL, Mauritius shows the commonality of interests between the two companies.

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From the arguments as above as well as the documents like the show cause notice and the impugned order, the crux of the matter is that an

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FPA-FE-957-960/MUM/2008

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Page 2 of 3

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allegation is made that M/s. THL have not provided any documents to prove the source of funds which they have invested/remitted to M/s. Sterlite Industries (India) Limited etc. in India and because some of the Directors are common to both the companies, it has been held that this money has actually been funded by M/s. Sterlite Industries (India) Limited to M/s. THL and then back to M/s. Sterlite Industries (India) Limited. However, I do not find any prima facie evidence, documentary or otherwise on which the adjudicating authority has relied upon to conclusively prove the above charges. Whether there is a round tripping of funds, the interests of the common Directors in each of these companies, the actual source of funds, are matters of detail which will be gone into at the final hearing stage. Prima facie, I find that the appellants have a strong case on merits and accordingly stay the pre-deposit. They have not pleaded for any undue hardship and hence no orders are passed on the same.

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List the matter for final hearing on 14^th October, 2019.

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(Ananya Ray) Member

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New Delhi, 06^th August, 2019 ‘A’

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FPA-FE-957-960/MUM/2008

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FPA-FE-960/MUM/2008 of Shri D.P. Agarwal v/s The Special Director, Directorate of Enforcement, Mumbai

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FPA-FE-960/MUM/2008 of Shri D.P. Agarwal v/s The Special Director, Directorate of Enforcement, Mumbai

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