Partly allowed

FPA-FE-07/MUM/2013 of M/s. Alliance Leicestar Plc Ltd. v. The Assistant Director, Directorate of Enforcement, Mumbai

ATFP4 Jul 2024FPA-FE-07/MUM/2013

Case brief

AI extract

What is this about?

The Tribunal allowed part of the appeals filed by an overseas bank and its CEO against FERA penalty orders. It upheld jurisdiction and the abetment charge but reduced the penalties from over Rs. 13.28 crore to Rs. 1 crore for the bank and Rs. 5 lakh for the individual to ensure proportionality.

What did the court decide?

Penalties reduced to Rs. 1,00,00,000 for the Appellant Bank and Rs. 5,00,000 for the individual Appellant.

FPA-FE-07/MUM/2013 of M/s. Alliance Leicestar Plc Ltd. Vs… — Banking and Recovery | ATFP (2024)

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APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

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1. FPA-FE-07/MUM/2013 M/s. Alliance Leicestar Plc Ltd … Appellant 2. FPA-FE-192/MUM/2008 M/s. Alliance Leicestar Plc Ltd … Appellant 3. FPA-FE-195/MUM/2008 John Baden … Appellant Versus The Assistant Director, Directorate of Enforcement, Mumbai … Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellants : Mr.S. De, Ms. V. Mohan, Advocates For the Respondent : Mr.Pranav Mishra, Advocate CORAM JUSTICE MUNISHWAR NATH BHANDARI : CHAIRMAN SHRI BALESH KUMAR : MEMBER

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ORDER 04.07.2024

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This Order disposes of the Appeals No. FPA-FE192/MUM/2008, FPA-FE-195/MUM/2008and FPA-FE-

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07/MUM/2013. The Appeals Nos. FPA-FE-192/MUM/2008 and FPA-FE-195/MUM/2008 were filed by the Appellant M/s. Alliance Leicestar Plc Ltd and by the Appellant Mr. John Badenrespectively against the Order No. ADJ/24-42/B/SDE/KNR/2008/FERA dated 09.07.2008, passed by the Special Director, Enforcement

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Directorate, Mumbai. Vide the Impugned Order penalty of Rs. 13,28,82,000/- was imposed on Girobank Plc, UK (presently known as Alliance Leicestar Plc Ltd) and penalty of Rs. 6,64,41,000/- was imposed on Mr. John Baden, former Chief Executive Officer (CEO) of Girobank Plc, UK.

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Appeal No. FPA-FE-07/MUM/2013 was filed by M/s. Alliance Leicestar Plc Ltd against the Order No. ADJ/1112/B/SDE/RAJ/2010/FERA dated 11/02/2010 passed by the Special Director, Enforcement Directorate, Mumbai. Vide the Impugned Order dated 11.02.2010 penalty of Rs. 1000/- was imposed on Girobank Plc, UK (presently known as Alliance Leicestar Plc Ltd) and penalty of Rs. 500/- was imposed on Mr. John Baden, former CEO of Girobank Plc, UK.

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In the Appeals No. FPA-FE-192/MUM/2008 and FPA-FE195/MUM/2008 this Tribunal vide Order dated 11.09.2008 directed the Appellants to furnish unconditional bank guarantee of the full amount of penalty within a period of 30 days of the date of the receipt of the Order. The Order was complied with. An application with supporting documents, was filed by the Appellants on 03.06.2022 to give effect to change in the name of the Appellant Bank,which was allowed.

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With respect to the Order No. ADJ/11-

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12/B/SDE/RAJ/2010/FERA dated 11.02.2010, penalty of Rs.

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1000/- and Rs. 500/- werepaid by M/s. Alliance Leicestar Plc Ltd and by Mr. John Baden respectively. In the Appeal No. FPA-FE07/MUM/2013the Impugned Order dated 11.02.2010 has been challenged by the Appellant M/s. Alliance Leicestar Plc Ltd.

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The Impugned Order dated 09.07.2008 disposed of 19 Show Cause Notices (SCN) No. T-4/19-B/93(SCN 3,7,11, 15,19,24,27,31,35,40,45,50,55,59,64,70,72,78,82) all dated 25.06.1993 issued to the two Appellants for the contravention of Sections 64 (2) r/w Sections 6 (4), 6(5), Section 49 and 73 (3) of the Foreign Exchange Regulation Act, 1973 (FERA). 19 specific transactions took place whereby the account of the Appellant in the ANZ Grindlays Bank, Mumbai was credited from time to time, pursuant to instructions/demand drafts from the Bank of Foreign Economic Affairs of USSR, HSBC Bank, Canara Bank, Indian Overseas Bank and Punjab National Bank for a total sum of Rs. 66,42,48,246/-. The ANZ Grindlays Bank was charged separately for engaging in the said transactions which were not in conformity with the terms of the authorization to deal in foreign exchange as they failed to require the persons on whose behalf the aforesaid transactions were undertaken make such declarations and to give such information as would have reasonably satisfied them that the said transactions would not involve and were not designed for the purpose of any contravention or evasion of the provisions of FERA or of any rule and notification there under in contravention of the provisions of Sections 6 (4) r/w 6(5) r/w 49 & 73 (3) of FERA. The

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Appellant Bank was charged for abetting in the said contraventions in terms of Section 64 (2) of FERA. Mr. John Baden being the CEO of the Appellant Bank was charged in terms of Section 68 (1) of FERA. Since the credits were made by the ANZ Grindlays Bank under the instructions of the Appellant Bank into its account, instead of any account of M/s Eastern Suburbs Ltd., the Appellant Bank and its CEO were charged.

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The Impugned Order dated 11.02.2010 disposed of two SCNs No. T-4/11-B/94(SCN VII, IX) dated 08.02.1994. SCNs No. T-4/11B/94(SCN VII) related to crediting of cheque issued by the Indian Overseas Bank into the account of the Appellant Bank maintained in Standard Chartered Bank, Mumbai in contravention of Sections 6 (4) r/w 6(5) r/w 49 & 73 (3) of FERA. The Appellant Bank was charged for the aforementioned contraventions in terms of Section 64 (2) of FERA for having abetted the Standard Chartered Bank, Mumbai.

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With respect to SCNs No. T-4/19-B/93(SCN 3,7,11, 15,19,24,27,31,35,40,45,50,55,59,64,70,72,78,82) all dated

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25.06.1993, the Appellants raised the preliminary issue relating to jurisdiction. Their contention was that the provisions of FERA are not applicable to them as they were not resident in India. The Ld. Adjudicating Authority vide its Order dated 06.08.1997 rejected the contentions of the Appellants on the issue of jurisdiction. The Appellants preferred an Appeal against the decision before

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theerstwhile FERA Board, which on 04.11.1997 remanded the case to the Adjudicating Authority to hear the Appellant on the question of jurisdiction. No progress could be made in view of stay by the Hon’ble Supreme Court in a related matter. The Apex Court vide its Order dated 24.02.2006 in Civil Appeal No. 1748 of 1998 finally allowed the Respondent Directorate to hold the adjudication proceedings.

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Ld. Counsel for the Appellants argued that the Ld. Adjudicating Authority for the Impugned Ordersdid not first dispose of the question about the jurisdiction in spite of the Order dated 04.11.1997 of the erstwhile FERA Board. The Appellants were not amenable to the jurisdiction of the Indian Courts/ Tribunals as FERA lays down in Section 1 that it applies to whole of India, only to Indian citizens and to corporates registered in India. The Appellant bank was neither the authorized dealer nor person resident in India. It in fact, did not carry on any business in India. Hence, the SCNs were vague having not specified how the charges would apply to the Appellants.

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Ld. Counsel for the Appellants further argued that the charge of an abetment against the Appellant bank under Section 64 (2) of FERA has not been made out. It is contended that the charge of abetment was not explained to the Appellants. Ld. Adjudicating Authority failed to establish any role played by the Appellant in abetting the ANZ Grindlays Bank/ Standard Chartered Bank in the

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contravention of the aforementioned FERA provisions. In Appeal No. FPA-FE-07/MUM/2013 the Authorized Dealer was Standard Chartered Bank, however Ld. Adjudicating Authority in part of the Impugned Order dated 11.02.2010 wrongly referred to the ANZ Grindlays Bank.The responsibility for ensuring compliance to the provisions of Sections 6(4) and 6(5) of FERA were squarely on the Authorized Dealers (ADs). Ld. Adjudicating Authority has failed to apply the definition of abetment as per law in the facts and circumstances of the case, wherein the intention to aid the commission of the crime is gist of the offence. FERA does not define abetment. The Impugned Order relies upon Section 107 of the Indian Penal Code to define abetment. Ld. Counsel for the Appellants contended that the telex message dated 21.06.1991has been relied upon by the Ld. Adjudicating Authority. However, the telex message has not been shared with the Appellants. In any case, even on merit, the case of abetment is not made out since no mens rea has been proved. Ld. Counsel argued that an internal document prepared by M/s ANZ Grindlays Bank viz. the Minutes of Meeting dated 30.03.1993 has been relied upon by the Ld. Adjudicating Authority. It is contended that the Appellant bank has no knowledge of the existence of the said document and got no opportunity to cross examine its author. Since, the Ld. Adjudicating Authority has relied upon the said two documents in the Impugned Order dated 09.07.2008,the principles of natural justice have been violated.

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Ld. Counsel for the Appellantsalso argued that this Tribunal vide Order dated 20.09.2019 allowed the Appeal of the ANZ GrindlaysBank against the order in which it was penalized for the contravention of the said FERA provisions. Since, the charges against the ANZ Grindlays Bank could not be sustained there cannot exist the charge of abetment against the Appellant Bank. The Appellant Bank, being an English bank and having no account in India other than the account in M/s ANZ Grindlays Bank and the account in M/s Standard Chartered Bank,it was in no way responsible to obtain the permissions of the Reserve Bank of India (RBI) for making the aforementioned transactions. The responsibility was that of the ADs to comply with the provisions of the Exchange Control Manual (ECM) then inforce. The Appellant bank was part of the External Group and not of the Bilateral Group for whom the rupee balance could not be converted into foreign exchange without prior approval of Reserve Bank of India (RBI). Ld. Counsel pleaded that the penalties imposed have been excessive.

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Ld. Counsel for the Respondent stated that the contentions of the Appellants with regard to non compliance to the Order dated 04.11.1997 of the erstwhile FERA Board is found baseless on perusal of the Impugned Order dated 09.07.2008. Ld. Adjudicating Authority has clearly recorded that on 22.10.2007 the facts were explained to Advocates for the noticees during the course of personal hearing. Ld. Adjudicating Authority has further recorded that the noticees including the Appellant Bank admitted the facts of

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the case as correct. Having complied with the said Order dated 04.11.1997, the Ld. Adjudicating Authority went on to establish the charge of abetment against the Appellant Bank. Ld. Adjudicating Authority relied upon two documents both of which were part of the correspondence made by ANZ Grindlays Bank with the Appellant Bank and with the RBI which were forwarded by the RBI to the Respondent Directorate. The Appellants have wrongly contended that thesedocuments viz. telex dated 21.06.1991 from the Appellant Bank to ANZ Grindlays Bank and Minutes of the Meeting between the officials of the ANZ Grindlays Bank and the officers of the Appellant Bank in London held on 30.03.1993 were not known to them. Ld. Counsel for the Respondent stated that the Ld. Adjudicating Authority has specified in the Impugned Order that two documents were relied upon as Item No. 18 in SCN No. 72 and also in other SCNs. He therefore stated that there was no contravention of the principles of natural justice. Ld. Adjudicating Authority has correctly inferred that the Appellants indulged in abetment of the aforementioned contraventions of FERA. Ld. Counsel for the Respondent argued that the Order dated 04.11.1997 of the erstwhile FERA Board held that abetment charged under Section 64 (2) of FERA is one of the several provisions under FERA which apply to contravention committed in India irrespective of whether the contravener is Indian national or a non-national. The erstwhile FERA Board went on to hold that if the effect of any act done outside is in India such act would be deemed to have been done in India, the reason being that the element of

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instigation continues up to the movement immediately before the commission of the main offence. In fact, accordingly the Ld. Adjudicating Authority held the charge to be established against the Appellants. Ld. Counsel argued that the reference to ANZ Grindlays Bank instead of the Standard Chartered Bank in the Impugned Order dated 11.02.2010 is inadvertent error as is evident from the subsequent paragraphs of the said Order.Ld. Counsel for the Respondent therefore stated that the contentions of the Appellants about the jurisdiction, violation of principles of natural justice and charge of abetment do not hold good. The penalties imposed under the Impugned Order dated 09.07.2008 are commensurate to the amount involved in the contraventions.

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Ld. Counsel for the Respondent argued that the Orders dated 20.09.2019 in the Appeals No. FPA-FE-91-97,105-110,112-114 & 121-122/MUM/2007 in the matter of ANZ Grindlays Bank and the Appeals Nos. FPA-FE-10-13 & 50-57/MUM/2008 in the matter of Canara Bank cannot be referred to in the present Appeals. He stated that the aforementioned orders of the Tribunal are pending consideration before the Hon’ble Bombay High Court and hence the same have not attained finality. He cited the following concluding paragraphs of the order dated 20.09.2019 issued in the Appeals filed by ANZ Grindlays Bank and its employees by this Tribunal:

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„301. There is no disputes that contravention in the above said case have happened. From the entire gamut of the case, no material is found to establish that the banks and its official are involved in any conspiracy directly or indirectly, intentionally or deliberately for the said lapse. No doubt it is

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serious matter and it should not have happened. It did happen 1991 when communication and technology was not so equipped. Even staff or banks officials may not be experts at that point of time. From the conduct of the bank and pleading of all the appellants, it appears that they are feeling their mistakes‟.

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„303. It is matter of fact that entire penalty amount has been deposited by the Bank. It appears that after realizing lapse on their part, in order to show their bona-fide, the statement was made during hearings of appeals that without prejudice, the said penalty amount shall not be pressed by the appellants for refund. The same may be deposited with the Prime Minister Relief Fund, if so advised by the respondent‟.

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Ld. Counsel argued that even the aforementioned orders of the Tribunal has accepted that serious contraventions had occurred and therefore did not press for refund of the amount of penalty already deposited, so as to bring closure to the case.

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We have carefully considered the rival submissions and the material on record. On perusal of the two orders dated 20.09.2019 of this Tribunal with respect to Appeals Nos. FPA-FE-91-97,105110,112-114 & 121-122/MUM/2007 filed by ANZ Grindlays Bank and its employees and Appeals Nos. FPA-FE-10-13 & 5057/MUM/2008 filed by Canara Bank and its employees, we are unable to persuade ourselves to hold that the two orders have binding impact on the present Appeals before us. The orders of the Tribunal do not propound ratio of binding nature. The orders otherwise suffer from contradictions. The order has recorded contraventions of the provisions and has taken it to be serious yet has recorded finding in favour of the appellant therein. The next

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paragraph refers to realization of mistake of lapse by the Appellant and therefore no claim for recovery of the amount already deposited. It would be when lapse is admitted. The two orders are under challenge before the Hon’ble Bombay High Court and thus have not attained finality. We are therefore inclined to dispose of the present Appeals in terms of their own merit.

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14.It is not disputed that the transactions as listed in the Impugned Order dated 09.07.2008 for which 19 SCNs were issued entailed credit of sums of money in the non-resident convertible rupee account. Similar is the position with respect to the Impugned Order dated 11.02.2010.These transfers to non-resident convertible rupee accounts enabled payments to be made in Foreign Exchange to a person resident outside India. The Exchange Control Manual stipulated that crediting of any amountinto the non-resident rupee account is equivalent to remittance in foreign currency from India to a country in which the branch or correspondent was situated. Such crediting was done by those banks in India viz. ANZ Grindlays Bank and Standard Chartered Bank, in which the Appellant Bank held its accounts. The ANZ Grindlays Bank furnished certified copies of statements of account of the Appellant Bank evidencing crediting of the amounts therein. It is also not disputed thatin few of such cases credits were made in the account of the Appellant Bankinstead of any account of the beneficiary client.

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Since from both the sides, the Order dated 04.11.1997 of the erstwhile FERA Board has been emphatically argued, we feel that certain paragraphs of the Impugned Order dated 09.07.2008 need to be reproduced here:

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“23. Accordingly, the facts were explained to advocates for the notices on 22/10/2007 during the course of personal hearing. The noticees admitted that facts alleged by the Department, vide para 13 of their reply dated 22/11/2007. Therefore, I proceed with the first direction of the FERA Board to decide the question of jurisdiction.

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24. In this connection, Sub-section (2) of Section 1 of the Foreign Exchange Regulations Act, reads as “it extends to the whole of India.” Therefore, any transaction taken place in India whether by an Indian Citizen or foreign Citizen is covered under this sub-section. There is no doubt that the Girobank had opened a Vostro account with the ANZ Grindlays Bank Ltd. Mumbai. The ANZ Grindlays Bank is allowed to open the said account on the basis of a general permission given by the Reserve Bank of India by a notification issued under the provisions of FERA, 1973. This general permission is found at paragraph 10.2 of the Exchange Control Manual, 1987 Edition published by the Reserve Bank of India. If any person was allowed to open the account on the basis of an instruction or direction issued by the Reserve Bank of India under the FERA, it is obvious that the said person who opened an account on the basis of the said instruction or direction is bound by the FERA. Therefore, when Girobank Plc opened an Account with the bound by the FERA. Therefore, when Girobank Plc opened an Account with the ANZ Grindlays Bank in India, and is operating the said account, to my mind they are covered under provisions of sub-section (2) of Section 1 of FERA 1973.

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25. As opined by the FERA Board, foreign nationals also can be covered under the FERA in view of Sec. 1 (2) of FERA, 1973 when it has observed that (page 7 of FERA Board order)

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“We do not think that the argument advanced by Shri Mahajan helps the appellant. There are several provisions

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in the Act which apply to contravention committed in India irrespective of whether the contravener is Indian national or a non-national. Reference could be made to Section 9. Section 64 (2) with which the appellant bank has been charged is also one such provision. It is to be noted that the offence of “abetment” as contained in Section 64 (2) is an independent offence in itself. Therefore, the question that remains to be examined is whether the alleged abetment or the acts constituting the alleged abetment have been done within the territory of India so as to attract the provisions of Section 1(2) of the Act. If it is so the Act would be applicable and the adjudication proceedings against the appellant bank would be within jurisdiction.”

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26. Therefore, I am of the opinion that the Girobank Plc, who is maintaining a correspondent bank account with the ANZ Grindlays Bank Ltd, Mumbai is obliged to obey the rules and regulations in India as far as foreign exchange transactions in the said account is concerned; and as such the undersigned have the jurisdiction to adjudicate the matter under the Foreign Exchange Regulation Act, 1973.

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27. Further in line with the direction of the FERA Board, the Girobank Plc have already admitted the facts of the case as correct. As such I am required to decide whether these acts constitute an abetment with actions by the ANZ Grindlays Bank Ltd. in Mumbai.

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28. In this connection, I find from the statement of A/c. No. 01CBB8136400 of Girobank Plc with ANZ Grindlays Bank Ltd., Mumbai that there are nineteen credits totalling to Rs. 66,42,48,246/- into this account which are the subject matter of these show cause notices. I find that the RBI vide their letter dated 28/4/1993 had forwarded to the Directorate of Enforcement, the correspondence exchanged by the ANZ Grindlays Bank with RBI as well as the correspondence by ANZ Grindlays Bank with Griobank Plc, UK (Documents relied upon – item No. 18 in SCN 72 and also in other SCNs). The documents enclosed by ANZ Grindlays Bank include certain telex messages between the Girobank Plc and ANZ Grindlays Bank, Bombay. One such telex dated 21/6/91 from Girobank to ANZ Grindlays Bank, inter-alia, reads as under:-

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“FURTHER TOOUR RECENT TELEXES WE HAVE BEEN INFORMED THAT YOU RECENTLY RECEIVED INR 33,000,000.00 FROM CANARA BANK, BOMBAY FOR OUR ACCOUNT FAVOUR EASTERN SUBURBS AND THAT THESE FUND WERE RETURNED BY YOUR OFFICE WITH THE REASON THAT YOU WRE UNABLE TO APPLY. WOULD YOU KINDLY CONTACT CANARA BANK AND HAVE THESE FUNDS REPAID TO YOU AND CREDITED TO OUR ACCOUNT 01CBB8136400 UNDER TESTED TELEX ADVICE TO OURSELVES ADDING YOUR CONFIRMATION THAT THE ULTIMATE BENEFICIARY IS EASTERN SUBURBS LTD.”

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29. This is one of the transactions mentioned above where initially the officers in ANZ Grindlays Bank refused to credit the funds to the credit of Girbank‟s account with them, as the beneficiaries name was given as “Eastern Suburbs Ltd” and there was no mention of Girobank on the instrument. Therefore, it is very clear that upon direct instructions from the Girobank to overlook the discrepancy in the instrument and even requesting the ANZ Grindlays Bank to recall the funds and credit it to their account on behalf of their client Eastern Suburbs Ltd, the ANZ Grindlays Bank recalled the funds from Canara bank and credited it to the account of Girobank with them. Though I agree that it was the prime responsibility of ANZ Grindlays Bank to adhere to the exchange control regulations in India, if Girobank had opened an account to deal in foreign exchange in India, they were also required to obey the rules and regulations in India in respect of the transactions entered into by them in India. There are many other telexes from the Girobank in respect of other transactions submitted by the ANZ Grindlays Bank.

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30. Further it is seen that the ANZ Grindlays Bank had convened a meeting with the officers of Girobank in London to discuss the issue upon detection of the unauthorised transactions. The minutes of the meeting prepared by Shri G.P. Pande, General Manager of ANZ Grindlays Bank on 30/03/1998, copy of which was forwarded to the Directorate by the RBI with its letter dated 28/4/1993 (Documents relied upon-item No. 18 in SCN 72 and also in other SCNs), which reads as under:-

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“Meeting with Girobank plc, U.K. (GB) in London Those Present:

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N.S. Butler (NSB) Head of International Division Bobert P. Edwards, Manager, International Branch, London (cards enclosed)

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ANZ Bank:

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G.P. Panda (GPP)- GM- Investment Banking Bombay D.R. F Grehan- GM- Correspondent Banking London

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The meeting was arranged to discuss the issue of crediting of GR‟s accounts by Rs. 664 M in 19 transactions on the instructions of Bank of Foreign Economic Affairs (BFFA), Moscow between April and August 1991 on behalf of Eastern Suburbs UK (ES). Prior to the meeting, we had written a letter dated 19^th March, 1993 to Mr. S. Anderson, General manager, GB on the subject, requesting reversal of these entries.

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1. NSB stated that GB had been apprehensive at the time of opening ES‟s account in April, 1991 as the transaction did not appear to be clear to them. However, they opened the account when they were given copies to „trade‟ contracts by Eastern Suburbs with all necessary details. GB however reported this matter to the Bank of England and the Narcotics Squad, U.K. as they were unsure of the direction of the funds and the beneficiary. NSB stated they obtained a verbal go-ahead from Bank of England after explaining these transactions. At no point of time was GB aware that these would violate the Indian Exchange Control Regulations. At one stage however (during this period) GB did consider withdrawing as they were not satisfied. However, their Legal Advisors informed them that as they had agreed to a certain number of transactions with ES, these could not be stopped till completion. A legal suit could be brought against the bank. Once the transactions were completed in August, 1991 the account with Eastern Suburbs was closed and no more transactions took place. The Bank had taken legal advice on specific wordings of the telexes which they wished to receive from us viz. confirmation of „clear balances‟ and the intended beneficiary. NSB insisted that they were always uneasy with their relationship with Eastern Suburbs, but could find no valid reasons not to undertake these transactions which seemed to be only remittance transactions.

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2. GPP stated that the transactions had caused embarrassment to the Bank in India and elsewhere as we

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had acted in good faith in crediting accounts based on valid authorized instructions given by GB and BFEA. Details of transactions were discussed. ANZGB was surprised that despite the Senior Management in GB being unhappy with these transactions, they did not bother to check these out with the bank in India and re-confirmed the nature of these transactions. Had that been done at the initial stage itself. These transactions could have been avoided. It was the duty of correspondent banks to warn and inform its counterparty should it well known to it. It was disconcerting to see that such elementary precaution had not been taken by GB.

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3. GPP stated that at no point in all the communications examined by the Bank in India had they come across any telex/fax on letters from GB which specifically mentioned whether Exchange Control permission had been obtained or was required. If GB was so wary of these transactions all it needed to do was to make some enquires with ANZGB at London or Bombay.

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4. GB telexes always requested whether the funds had been cleared which in banking parlance meant whether funds were available for disbursement/ deployment. The Exchange Control clearance was not being confirmed in our telexes to GB.

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5. GPP informed GB that the RBI was examining the issue of writing to Bank of England in this matter. We requested that GB give us a detailed reply to our letter of 19.03.1993 to Mr. S.Anderson as well as other queries raised during the meeting. GPP also mentioned that the Enforcement Directorate had written to us specifically asking for names of ultimate beneficiaries from GB. GPP mentioned that the Enforcement Agencies were aware that these transactions had been negotiated between Eastern Suburbs and GB matter. NSB re-confirmed that GB had no intention to violate Indian Exchange Control Regulations and in fact were not aware of detailed rules and regulations governing credits into their Rupee Accounts at any stage.

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6. GPP requested GB to consider reversing the transactions from Eastern Suburbs account as the transfers were illegal under Indian rules. GB indicated that this was not possible as they had already closed the Eastern Suburbs account in

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1991. They also mentioned that Keith Fairbrother was a director of Eastern Suburbs along with his wife, and the address given in the Account Opening Form was that of his resident in UK. GB is seeking legal advice before they reply to our letter. It was quite clear that GB was aware of the transactions and were un-easy with it. Despite that, this was not conveyed to our bank. This made them defensive throughout this meeting with us. (emphasis supplied) NSB promised to revert to us early with a formal response for the Bank.

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Sd/G.P PANDE General Manager-Investment Banking Date: 30^th March, 1993

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31. From the above, it is clear that the officials of Girobank in London were aware that these transactions are not in order and they have hidden their doubts from the ANZ Grindlays Bank also. To quote Shri G.P. Pandey, “It was quite clear that G.B was aware of the transactions and were uneasy with it. Despite that this was not conveyed to our bank. This made them defensive throughout this meeting with us.” Thus, what is to be considered is whether the acts or in action of Girobank constitute any abetment.

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33. In this case it is clear from the telex message quoted above, that the Girobank had instigated ANZ Grindlays Bank in recalling the funds from Canara bank and credit the same to their account. It is also clear from the minutes of the meeting submitted by Shri G.P Pandey that the Girobankwillfully concealed material fact which they were bound to disclose, thereby voluntarily caused and illegal thing to be done. Therefore, it is further clear that they instigated the doing of that thing.

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34. Thus, though the instigation was initiated from London, the effect of that action is felt in India; and the FERA Board has already held in their order that “It is necessary to observe that if the effect of any act done outside India is in India such act would be deemed to have been done in India, the reason being that the element of instigation continues up to the moment immediately before the commission of the main offence.”

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From the aforementioned paragraphs of the Impugned Order dated 09.07.2008, it is obvious that the Ld. Adjudicating Authority has complied with the Order dated 04.11.1997 of the erstwhile FERA Board. Ld. Adjudicating Authority has logically and with reasons held that the charge of abetment under Section 64 (2) of FERA is applicable to the Appellant Bank.In paragraph 15 of the Impugned Order dated 09.07.2008, Ld. Adjudicating Authority has noted that the facts on the basis of which the charge of abetment was made was explained to the Advocates representing the Appellants at the hearing on 22.10.2007. It was pointed out by the Ld. Adjudicating Authority that the statement of account of Girobank Plc, current account NRE-Correspondent Bank maintained by ANZ Grindlays Bank Mumbai showed credits and debits in short intervals. This showed that the noticee bank might be aware of the corresponding credits and debits into NRE account with ANZ Grindlays Mumbai. We have already noted that it is not in dispute that 19 credits were made in the account of the Appellant Bank with the ANZ Grindlays Bank and one credit was made in the account of the Appellant Bank with the Standard Chartered Bank. With such undisputed facts whereby the Appellant Bank even though being non-resident was accepting credits in its convertible accounts which allowed it to transfer such credits in foreign exchange to its client abroad, it cannot deny that it is not covered by the domestic law of FERA. Certain acts of the Appellant Bank sitting abroad triggered and facilitated responses in India which

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were not in accordance with the domestic law. Acceptance of any domestic law only in so far as it is beneficial,without complying to its regulatory and penal provisions cannot hold good. We therefore find that the Ld. Adjudicating Authority decided the issue of jurisdiction correctly and fairly.

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The reliance placed by the Ld. Adjudicating Authority on the two documents produced by the ANZ Grindlays Bank i.e. telex message dated 21.06.1991 and the Minutes dated 30.03.1993 of the Meeting between the officials of the ANZ Grindlays Bank and the Appellant Bank,has been questioned. It has been contended that the two documents were neither shared with the Appellants nor subjected to cross examination,hence could not have been relied upon.The first document is the telex from Girobank to ANZ Grindlays Bank and the contents thereof have been brought out in the earlier paragraph. It is a matter of record that the said telex originated from the Appellant Bank.The part of the Impugned Order dated 09.07.2008 which has been cited in the earlier paragraph reveals that the said telex was part of the correspondence by ANZ Grindlays Bank with Girobank Plc UK and were forwarded to the Respondent Directorate by the RBI vide its letter dated 28.04.1993. It is categorically mentioned in the cited paragraphs that telex was part of documents relied upon as item no. 18 in SCN 72 and also in other SCNs. Even if for the argument sake if it is accepted that the telex was not shared with the Appellants, we find that the telex emanated from the Appellant Bank and therefore no prejudice is

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caused to them by not sharing the telex at subsequent stage of issuing the SCN. The second document Minutes of the Meeting reflect the discussion which the officials of ANZGrindlays Bank had with the officials of Girobank in London. Ld. Adjudicating Authority has categorically stated, as brought out in the cited paragraphs that this was also part of Item No. 18 in SCN 72 and also in other SCNs as documents which were relied upon. On perusal of the relevant paragraphs of the Minutes, we do find that there are certain inferences which have been drawn by the author of the Minutes, from the Meeting which was held. Since, the author of said Minutes could not be cross examined by the Appellants we are unable to admit the said Minutes as evidence. The moot question, whether the conclusion drawn by the Ld. Adjudicating Authority about the charge of abetment against the Appellants can stand without the said Minutes, needs to be examined.

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The Appellant Bank has been charged for contravention of Section 64 (2) read with Section 6 (4), Section 6 (5) and Section 49& 73 (3) of FERA. Section 6 (4) and 6 (5) and 49 & 73 (3) of FERA require that the banks which are ADs shall not engage in any transaction involving any foreign exchange which is not in conformity with the terms of its authorization as AD and to obtain necessary declarations in this regard from the person on whose behalf it undertakes such transactions as well as shall comply with

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the conditions of such permission. Section 64 (2) of FERA reads as follows:

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(2) Whoever attempts to contravene, or abets any contravention of any of the provisions of this Act [other than section 13, clause (a) of sub-section (1) of [section 18, section 18-A], clause (a) of sub-section (1) of section 19, sub-section (2) of section 44 and sections 57 and 58] or of any rule, direction or order made thereunder, shall, for the purposes of this Act, be deemed to have contravened that provision, rule, direction or order, as the case may be.

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Since,abetment has not been defined under FERA, Ld. Adjudicating

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Authority has looked at Section 107 of the Indian Penal Code 1860

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(IPC) For ease of reference Section 107 IPC is reproduced below:

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“107. Abetment of a thing.- A person abets the doing of a thing, who-

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First,- Instigates any person to do that thing; or

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Secondly, - Engages with one or more other person or persons in any conspiracy for the doing of that thing, if an act or illegal omission takes place in pursuance of that conspiracy, and in order to the doing of that thing; or

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Thirdly,- Intentionally aids, by any act or illegal omission, the doing of that thing.

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Explanation 1.- A person who, by wilful misrepresentation, or by wilful concealment of a material fact which he is bound to disclose, voluntarily causes or procures, or attempts to cause or procure, a thing to be done, is said to instigate the doing of that thing.

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Illustration

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A, a public officer, is authorized by a warrant from a Court of Justice to apprehend Z. B, knowing that fact and also that C is not Z, wilfully represents to A that C is Z, and thereby intentionally causes A to apprehend C. Here B abets by instigation the apprehension of C.

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Explanation 2.- Whoever, either prior to or at the time of the commission of an act, does anything in order to facilitate the

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commission of that act, and thereby facilitate the commission thereof, is said to aid the doing of that act.

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Certain extracts of relevant paragraphs of the judgement dated 03.06.2020 of the Supreme Court of India in Criminal Appeal No. 403 of 2010 in the case of Somasundaram @ Somu Versus The State Represented By The Deputy Commissioner of Police

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[MANU/SC/0467/2020: (2020) 7 SCC 722] are reproduced below:

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“ 49. Explanation (2) to Section 107 declares that whoever, either prior to or at the time of the commission of the act, does anything in order to facilitate the commission of that act and thereby facilitate its commission, is said to aid the doing of that act. Thus, anything done which facilitates the commission of the criminal act and promotes the commission of the act, would bring the person within the scope of abetment.

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52. In Arjun Singh v. State of Himachal Pradesh (AIR 2009 SC 1568), this Court held as follows:

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“11. … Law does not require instigation to be in a particular form or that it should only be in words. The instigation may be by conduct. Whether there was instigation or not is a question to be decided on the facts of each case. It is not necessary in law for the prosecution to prove that the actual operative cause in the mind of the person abetting was instigation and nothing else, so long as there was instigation and the offence has been committed or the offence would have been committed if the person committing the act had the same knowledge and intention as the abettor. The instigation must be with reference to the thing that was done and not to the thing that was likely to have been done by the person who is instigated. It is only if this condition is fulfilled that a person can be guilty of abetment by instigation.”

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54. The law does not permit the abettor to escape punishment for abetment even if the actual player who commits the offence is not criminally liable for the actual act which results in the commission of an offence (See in this regard, the situation contemplated in illustrations in Explanation III of Section 108 of the IPC). Equally, there need not be meeting of minds between all the persons involved in a conspiracy and it is sufficient if a person is engaged in the conspiracy following which the offence is committed (Explanation V to

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Section 108 of the IPC). This means that it is not even necessary that the persons who are engaged in the conspiracy, to even know the identity, leave alone physically meet the other players. There can be any number of persons depending on their guilty mind and acts or omissions which may render them liable.”

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It is on 20 different occasions that the non-resident convertible

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rupee accounts of the Appellant Bank were credited. 19 transactions of credit occurred in its account with the ANZ Grindlays Bank between 24.07.1991 and 22.08.1991 and 1 transaction of credit happened in its account with the Standard Chartered Bank on 28.02.1991. The credits which happened in the ANZ Grindlays Bank were in a short period of about a month. The record reveals that there were telex messages from the Appellant Bank to the ANZ Grindlays Bank for ensuring that the impugned credits were made to its account with the ANZ Grindlays Bank. One of such specific instance has been brought out by the Ld. Adjudicating Authority in the paragraphs cited earlier. It is from the facts and circumstances of a case that the intention, instigation and engagement are to be ascertained. The facts of the present case speak for themselves.The plea that the Appellant Bank was not part of the Bilateral Group but was included in External Group does not help its case. In fact, the Appellants should have been more careful in facilitating credits in their accounts with the ANZ Grindlays Bank and with the Standard Chartered Bank by virtue of not being part of the Bilateral Group. Repeatedly credits were being facilitated in non-resident convertible rupee account by the Appellant Bank. A mistake repeated more than once is a decision.FERA 1973 provided for a regulatory mechanism for

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certain payments, dealings in foreign exchange and security, transactions indirectly affecting foreign exchange and the import and export of currency for the conservation of the foreign exchange resources of the country and the proper utilization thereof in the interest of the economic development of the country. Even though the Appellant Bank was operating for its client, particularlyone Eastern Suburbs Ltd., its pleas to wash its hands offthe charge under FERA cannot be accepted under the present facts and circumstances. Section 59 of FERA 1973 provides for presumption of culpable mental state in any prosecution for any offence under the Act which requires a culpable mental state on the part of the accused, unless the accused proved the fact that he had no such mental state with respect to the charge against a particular offence. Sub-Section 3 of that Section makes such presumption applicable to proceeding before an Adjudicating Officer. The circumstances and the evidence in the present case reverse the burden on to the Appellant which it has failed to discharge. Therefore, the charge of the abetment against the AppellantBank stands established as it contravened Section 64 (2) read with Section 6 (4), Section 6 (5) and Section 49 and Section 73 (3) of FERA,with respect to Appeals Nos. FPA-FE-192/MUM/2008and FPA-FE-07/MUM/2013.

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It is a matter of record that Mr. John Baden was the Chief Executive Officer (CEO) of the Appellant Bank during the relevant period. He was responsible to the Appellant Bank for the conduct of its business. Ld. Adjudicating Authority has observed in the

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Impugned Order dated 09.07.2008 that no evidence was placed before him that the contraventions by the Appellant Bank had taken place without the knowledge of the CEO or that he exercised all due diligence to prevent such contravention. Mr. John Baden, then CEO of the Appellant Bank paid penalty of Rs. 500 imposed on him in the Impugned Order dated 11.02.2010 and has not filed Appeal against the said Order. Wetherefore find that the charge against the individual Appellant for the aforementioned contraventions in terms of Section 68 (1) of FERA is established in so far as his Appeal No. FPA-FE-195/MUM/2008 is concerned.

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22.Now, we would consider the argument on the quantum of penalty imposed on the Appellant. It is submitted that the amount of penalty of Rs.13,28,82,000/- imposed on the Appellant Bank and the amount of Rs. 6,64,41,000/- on the individual Appellant aredisproportionately higher for the charge of abetment alleged against the Appellants. The Appellantshave even argued against the allegation of abetment which however has not been accepted by us. In the facts and the circumstances of the case we do find that that amount of penalty is disproportionate to the allegation made against the Appellants. We accordingly reduce the penalties of Rs. 13,28,82,000/- on the Appellant Bankand Rs. 6,64,41,000/- on the individual Appellant in the Impugned Order dated 09.07.2008 to Rs. 1,00,00,000/- (Rupees One Crore Only) on the Appellant Bank and to Rs. 5,00,000/- (Rupees Five Lakhs Only) on the individual Appellant, which would meet the ends of justice.

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