Partly allowed

FPA-FE-241/KOL/2008 of Smt. Sunanda Kar v. The Assistant Director, Directorate of Enforcement, Kolkata

ATFP3 Jun 2024FPA-FE-241/KOL/2008

Case brief

AI extract

What is this about?

The Tribunal considered an appeal against a penalty of Rs. 30 Lakhs for non-realization of export proceeds. While establishing the contravention of FEMA due to management delays, the Tribunal reduced the penalty to the Rs. 4 Lakhs pre-deposit made by the appellant.

What did the court decide?

Penalty reduced to Rs. 4 Lakhs to be adjusted against the pre-deposit made by the appellant.

FPA-FE-241/KOL/2008 of Smt. Sunanda Kar Vs. The Assistant… — Cheque Dishonour | ATFP (2024)

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APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

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FPA-FE-241/KOL/2008
Smt. Sunanda Kar … Appellant
Versus
The Assistant Director,
Directorate of Enforcement, Kolkata … Respondent
Advocates/Authorized Representatives who appeared
For the Appellants : Mr. Deepayan Manda,
Mr. Naman Verma,
Mr. Mridul Bansal, Advocates
For the Respondent : Mr. A.R. Aditya, Advocate
CORAM
JUSTICE MUNISHWAR NATH BHANDARI : CHAIRMAN
SHRI BALESH KUMAR : MEMBER

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FINAL ORDER 03.06.2024

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This Order disposes of the AppealNo. FPA-FE-241/KOL/2008filed by Smt. Sunanda Kar against the Order No. SDE(SKP)II/03/2008 dated 30.05.2008 passed by Special Director, Enforcement Directorate, New Delhi. Penalty of Rs. 30 Lakhs was imposed vide the Impugned Order on the Appellant for the contravention of Section 7 & 8 of Foreign Exchange Management Act, 1999 (FEMA) r/w Regulations 9 and 13 (i) and (ii) of the Foreign Management (Export of Goods and Services) Regulations 2000. Predeposit of Rs. 4 Lakhs was made by the Appellant for the penalty imposed.

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Ld. Counsel for the Appellant statedthat the Appellant as proprietrix of M/s Panax Cashew exported four consignments of Cashew Kernals abroad vide shipping bills no. 4000192 dated 18.02.2000, 4001689 dated 02.11.2000, 4001830 dated 29.11.2000 and 4001094 dated 03.08.2000 totally valued at US $ 3,16,807.50. In the Appeal he had pleaded that since the consignment relating to the shipping bill no. 4001094 was returned and resold the total value of outstanding export proceeds was US $ 3,15,740. He admitted that the

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FPA-FE-241/KOL/2008

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export proceeds could not be realized for the said consignments. However, he argued that the Appellant had made efforts to realize the export proceeds. With respect to shipping bill no. 400192 he submitted that the Appellant had exported the goods to M/s Cetecom (Swiss Company) which in turn had filed a case in UK. The proceedings led to Arbitral Award whereby the amount was kept in an Escrow Account.With respect to goods exported vide shipping bills no. 4001830 and 4001094 to M/s Kenkko Commodities Ltd. (UK Company), M/s Cetecomtook action to get the goods detained at Rotterdam Port. The Appellant succeeded in litigation in UK to get the goods released but M/s Kenkko refused to accept the shipments due to delay. Before the Appellant could find a new buyer,the port authorities auctioned the shipments without the approval of the Appellant, to meet the port charges. Ld. Counsel for the Appellant argued that the buyer made the payment to its banker for the goods exported vide shipping bill no. 4001689 to M/s Lap Piedra Redona (Spanish Company). However, the said bank was restrained by the Court Order to send the payment to the Appellant. Ld. Counsel for the Appellant pleaded that the Appellant is a Senior Citizen and M/s Panax Cashew was shutdown in April, 2001. He argued that the Appellant took legal steps through State Bank of Travancore, the Authorized Dealer (AD), to pursue litigations in UK, Rotterdam and Spain. He stated that the State Bank of Travancore(SBT) accepted the responsibility for realization of all the outstanding dues and for the purpose Rs. 7 Lakhs was paidto the AD. In addition, the Appellant took direct steps through mails and phone calls to amicably resolve the disputes. The Appellant also reached out to the Indian Embassy for necessary help. He pleaded to allow the Appeal otherwise reduce the penalty to the amount already paid as pre-deposit.

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Ld. Counsel for the Respondent stated that the Impugned Order categorically brings out the failure on the part of the Appellant to realize the export proceeds for the four consignments. For shipping bill no. 4000192 the reason for the dispute was that the Appellant failed to export two containers on

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time due to shortage of funds and reluctance of SBT to finance the export. The Appellant merely furnished a copy of the arbitration order and no other material to confirm auction and claim of the buyer. For shipping bill no. 4001689, the Appellant did not submit any evidence as to why the goods were made subject matter of the court case and what action had she taken to defend the case in the Spanish Court. For shipping bill no. 4001830 the Appellant accepted that the payment could not be received as the consignment also got entangled in Court Case. Similarly, for the goods exported vide shipping bill no. 4001094 the payment could not be realized. He argued that the Ld. Adjudicating Authority has observed that the Appellant could not have passed on the responsibility to SBT to secure the unrealized proceeds. The reasons stated by her were sketchy and not convincing. No evidence was placed on record regarding steps taken by her to realize the proceeds. Hence, he pleaded that the Appeal may be dismissed.

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We have considered the rival submissions and material on record. We have perused the Impugned Order and observe that the Ld. Adjudicating Authority has found himself in dilemma as is obvious from paragraph 32 of the Impugned Order:

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“32. On a careful consideration of all the documents relied upon in the SCN and the submissions of the noticee company, I find that the proceeds in respect of the four shipping bills for which charges were framed in the SCN, no proceeds were realized. No doubt there are some documents indicating some court proceeding and also arbitration proceeding because of which the proceeds were not being remitted. In the case of consignments in respect of SB/4000192 dated 18.2.2000 & SB/4001094 dated 2.11.2000, the submission of the noticee is that the proceeds were credited in Escrow account and in the amount of buyer’s bank respectively and because of some legal proceedings, the amounts could not be remitted to India. I find from the records that the noticee either during the course of investigations or during adjudication proceedings submitted details/documents explaining as to the circumstances under which the legal proceedings were happened to be initiated, what steps the noticee had taken in defending their case and getting the remittances. The stand adopted by the noticee as it is observed from the submissions is that since the documents were negotiated through SBT, the onus of realization of the proceeds and also taking steps for realization was on SBT and not on the noticee. The submissions of

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the noticee and reasons for non-realisation given by the noticee were sketchy and not convincing. According to the noticee that alleged steps stated to have been taken by her or her representative were in the nature of contacting buyer over telephones and e-mail and nothing concrete. No evidence was produced regarding steps taken for promptly defending the suits/ arbitration proceedings. The stand that funds were provided to SBT for fighting the court cases can be considered as some attempt to secure the unrealized proceeds, but cannot totally absolve the noticee from her responsibility for realization of the proceeds as in terms of the exchange control regulations, the onus of securing the export proceeds within the stipulated time is on the exporter and such legal responsibility cannot be shifted to another person or entity. Considering the facts and submissions of the noticee, I find that even though the noticee/ authorized dealer (SBT) submitted some documentary evidences showing that some of the export proceeds could not be remitted due to court interventions etc., the noticee on her own did not do much to clear herself from the issues with sincerity and earnestness.”

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There are documents on record which show that the Appellant made efforts to realise the export proceeds. The documentbring out the arbitration award, notices issued by the Rotterdam Court, advice of Bank of the buyer La Piedra Redonda that the consignment documents have been received and payment to be made from bank to bank, letter from High Commission of India London as to case having been filed by the Appellant against M/s Cetecom, acknowledgment by SBT of information from their Lawyer of hearing having been fixed by the Federal Court at Amsterdam, letter from shipping line that the containers the detained by M/s Cetecom, letters from the Appellant to M/s La Piedra Redonda, letter from SBT of requesting their advocate for speedy realization of amounts of the Escrow Account and also advice to bank of La Piedra Redonda to expedite payment, letter from SBT apprising the Appellant of progress in the two matters, letter from SBT to the Appellant to pay the bill of the advocate abroad, letter from the advocate of having received the payment, letter from SBT to the Appellant to handle the court case directly, order of Commercial Court of Cordoba showing progress of proceedings and letter from Embassy of India, Spain that the Bank has informed that the Spanish Court has stopped them from making payment. There are documents also to

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show the Appellant had obtained extension for realization of export proceeds upto 03.02.2002 for two consignments.All these documents bring out that M/s Cetecom was instrumental in instituting court cases against the delivery of the consignments to other buyers in Europe which in turn led to non-payment of realization of export proceeds. It is also obvious that the Appellant made efforts either directly or through SBT to fight back the court cases and to expedite the realization of export proceeds. However, the delays in getting the goods released and in the inability to successfully find alternative buyers do not reflect well on the management of the firm and theinability of its proprietrix to avoid situationwhich ultimately led to the non-realization of the export proceeds. Therefore, the contravention of Section 7 & 8 of Foreign Exchange Management Act, 1999 (FEMA) r/w Regulations 9 and 13 (i) and (ii) of the Foreign Management (Export of Goods and Services) Regulations 2000 are established.

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In view of the aforementioned discussions, we would like to intervene with the Impugned Order and reduce the penalty to Rs. 4 Lakhs, which is the amount pre-deposited by the Appellant. The amount of predeposit made is therefore to be adjusted against the reduced penalty.

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