Partly allowed

FPA-FE-409/KOL/2005 of Sh. Ishaat Hussain v. Special Director, Directorate of Enforcement, Fera

ATFP8 Jan 2025FPA-FE-409/KOL/2005

Case brief

AI extract

What is this about?

Appeals challenging penalty orders for contraventions of the Foreign Exchange Regulation Act, 1973 regarding acquisition and borrowing of foreign exchange. The Tribunal upheld the contravention findings against the company but reduced the penalty to 25%. The appeal by the individual appellant was dismissed as no role was established.

What did the court decide?

Penalty against M/s Tata Korf Engineering Services Limited reduced from Rs. 45,00,000/- to 25%. Penalty against Mr. Ishaat Hussain set aside.

FPA-FE-409/KOL/2005 of Sh. Ishaat Hussain Vs. Special Director… — Cheque Dishonour | ATFP (2025)

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APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

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1. FPA-FE-408/KOL/2005
M/s Tata Korf Engineering	… Appellant
Services Limited
2. FPA-FE-409/KOL/2005
Sh. Ishaat Hussain Versus	… Appellant
Special Director, Directorate of
Enforcement, FERA	… Respondent

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Advocates / Authorized Representatives who appeared

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For the Appellant No.1	:	Mr. Adv Mr. Kum	Farukh Razack, ocate Faisal Farook; Mr. ar	Sr. Kshitij
		Mr. Rub Mr. Piyu Ms.	Subhail Farook; y Ahuja Vishal Gehrana; sh Sharma Roopali Gupta, Adv	Ms. Mr. ocates
For the Appellant No.2	:	Mr. Adv	Sidharth Luthra ocate	, Sr.
		Mr. Ahu	Mihir Joshi; Ms. ja	Ruby
		Mr.	Vishal Gehrana;	Mr.
		Piyu Ms.	sh Sharma Roopali Gupta, Adv	ocates
For the Respondent(s)	:	Mr. Ms. Adv	Shoumendu Mukhe . Megha Sharma Ar ocates	rji yasha,

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CORAM

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JUSTICE MUNISHWAR NATH BHANDARI : CHAIRMAN SHRI RAJESH MALHOTRA : MEMBER

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ORDER 08.01.2025

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These two appeals have been filed under Section 19 of

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the Foreign Exchange Management Act, 1999 (in short “ the

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Act of 1999 ”) to challenge the order dated 15.03.2005 passed

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by the Special Director of Enforcement Directorate, New Delhi vide which penalty of Rs. 2,00,00,000/- has been imposed on the appellant, M/s Tata Korf Engineering Services Limited (in short “ M/s TKESL ”) for contravention of Section 8(1) of the Foreign Exchange Regulation Act, 1973 (in short “ the Act of 1973 ”) and Rs.5,00,000/- on other appellant, Mr. Ishaat Hussain for the same contravention.

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The penalty of Rs. 25,00,000/- has been further imposed on M/s TKESL for contravention of Section 8(1) of the Act of 1973 for borrowing foreign exchange to the extent of US$ 333025 and £ 3720.20 and £ 3798.18. The penalty of Rs. 2,00,000/- has been imposed on the other appellant, Mr. Ishaat Hussain, for the same contravention.

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2. The challenge to the impugned order has been made by the two appellants. Although the penalty was imposed on many others vide the impugned orders, they may have not filed the appeals to challenge the impugned order and thus we would be addressing the issues raised by the two appellants.

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3. The Ld. Counsel for the appellants have submitted brief facts of the case which are as under:

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BRIEF FACTS OF THE CASE

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M/s Tata Iron and Steel Co. Ltd. entered into a joint venture business with M/s Korf K.G. Germany forming a new company i.e. M/s Tata Korf Engineering Services Pvt. Ltd. to promote new technologies in the field of metallurgical engineering.

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After the formation of the new Company and for the purpose of smooth working, it was realized that due to poor airline network in India at the relevant time, the personnel of M/s Korf K.G. Germany were facing difficulty in travelling from one destination to another. To overcome from the aforesaid problem, Dr. Willy Korf sent a letter to Mr. Aditya Kashyap, the then Director of the Tata Korf expressing his desire to place an aircraft in India. Dr. Willy Korf agreed to pay the necessary customs duty in foreign exchange, as applicable in India for import of an aircraft.

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The then Director of the Tata Korf, Shri Aditya Kashyap processed the case for grant of Custom Clearance Permit (CCP) for import of the aircraft to be placed in India. It took some time to get the CCP and in the meantime a decision was taken to send the upgraded aircraft instead of 1982 Cessna Citation II which was having estimated CIF value of Rs.2,39,68,000. After obtaining CIF, the information was

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sent to Dr. Willy Korf through a letter of Shri Aditya Kashyap to inform about permission to import the aircraft. The process was taken for sending the said aircraft, though it was the upgraded model of 1986 Cessna Citation II. Dr. Willy Korf undertook to pay customs duty, as may be applicable in foreign exchange.

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It was submitted that pursuant to the arrival of the aircraft at Calcutta, the Bill of Entry for House Consumption was submitted by M/s TKESL. Subsequently, the Bill of Entry was assessed for customs duty and a sum of Rs.60,87,444 was paid as customs duty. The aircraft was then registered with a Certificate of Registration obtained from the Civil Aviation Department. The aircraft 1986 Cessna Citation II was taken to be an asset of M/s TKESL. However, the appellant realized that aircraft has been taken to be an asset without capital outflow. The Board of the Company erroneously treated said aircraft as a gift from Korf K.G. Germany. The issue came before the Board to consider as to whether aircraft can be treated to be a gift when the foreign collaborator was not intending to gift the said aircraft to the company and accordingly in Board meeting of M/s TKESL a resolution was passed superseding the earlier resolution dated 26.06.1991 holding the said aircraft to be a gift. In fact, with the fresh Board resolution where it was not treated

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to be gift and accordingly it was removed from the schedule of fixed assets of the Company.

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The appellant, M/s TKESL, sought clarification from the Chief Controller of Imports and Exports, New Delhi, as to whether the aircraft could be treated as a ‘gift’ despite the fact that the foreign collaborators never intended to gift it. The Controller then clarified that the aircraft could be kept in India just to facilitate easy travel of their personnel. The said aircraft may not be treated as a gift. At this stage, the Officer of the Enforcement Directorate started an investigation in respect of the import of the aircraft under the Act of 1973. During the course of investigation, they summoned the officers concerned by issuing notices under Section 40 of the Act of 1973. According to the Directorate of Enforcement, New Delhi, it was an import of the aircraft in the hands of the appellant Company. The matter proceeded with the issuance of show-cause notice alleging contravention of Section 8(1) of the Act of 1973. A memorandum was issued to Tata Korf, Shri Russi H. Mody and many others, who are not appellants, other than Shri Ishaat Hussain. The said memorandum was duly replied to with a prayer that if the respondent proceeds to initiate adjudication proceedings, an opportunity of personal hearing be given. The respondent then passed the

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impugned order in ignorance of the facts and the provisions of law.

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Grounds of appeal

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4. The Ld. Counsel for the appellant submitted that without there being an element of acquisition and transfer of the foreign exchange of US$ 28,26,433.26 coupled with the allegations of borrowing of foreign exchange amounting to US$ 3,33,025 and £7,068.38, the allegations of contravention of Section 8(1) of the Act of 1973 were made. It is after ignoring the material on record and true facts given by the appellant.

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To substantiate the charges, the department relied on the submission of one Mr. James Patrick Kerrigan, Vice President, US Aircraft Sales Inc., USA and documents allegedly tendered by him which forms part of the authenticated documents received from Indian embassy in USA. The reliance on the documents has been made in ignorance of the fact that during the course of personal hearing before the Ld. Adjudicator, the appellant filed an application on 14.05.2004 to seek cross-examination of Mr. Kerrigan as the department was relying on his statement. After a protracted hearing, the prayer was allowed by the Special Director and accordingly, summons were issued to

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Mr. Kerrigan on 04.06.2004, who did not appear in response to the summons. He rather stated that, being a foreigner he could not be governed by Indian laws. The letter of Mr. Kerrigan for sale of Cessna Citation S-II aircraft in 1990 is the story which took place many years ago and he made the statement as desired by the Commissioner of the United States District Court for the eastern district of Virginia. The statement of Mr. Kerrigan could not have been relied by the respondent when an opportunity of cross-examination could not be given to the appellant. It could have been if a statement is made before the Court / Tribunal / Adjudicating Authority itself.

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The Counsel for the appellant, further, submitted that they never acquired foreign exchange amounting to US$ 28,26,433.26 and nor transferred to the said foreign exchange, as alleged in the memorandum. Similarly, the appellant did not borrow the foreign exchange amounting to US$3,33,025 and £ 7 ,068.38 ( £ 3270.20 + £3798.18) equivalent to Rs. 2,46,194/- at any point of time for issuance of memorandum alleging the contravention of Section 8(1) of the Act of 1973. The Ld. Counsel for the appellant, further, submitted that no evidence whatsoever could be produced by the respondent to prove acquisition or transfer of foreign currency by the appellant. The appellant referred to the

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certificate issued by Jurgen Benz, Managing Director, Korf Shipping GMBH. It is apart from the letter of Hans Jurgen Eckert dated 25.07.1992. The documents were sufficient to show that the payment for purchase of aircraft was made by Korf Shipping GMBH on the instructions of Dr. Willy Korf. The appellant, further, made reliance on the letter of Mr. V.K. Lakshmanan.

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The Ld. Counsel for the appellant further submitted that the bank draft of US$ 3,33,025 was issued by Swiss Bank Corporation in favour of the appellant company for payment of custom duty, which demonstrates that the payment was made by Korf Shipping GMBH and not by the appellant. The said amount was sent to Korf Organization through Mr. Kadan for payment of customs duty. The said draft, in terms of statement of Mr. Rohit Luthra dated 25.07.1994 was not issued by Swiss Bank Corporation, New York, but had been issued by one of its branch. The respondent failed to produce any document or evidence that the remitter of the draft was Tata, Inc., New York. As regards the two bank drafts amounting to Rs. 2,46,194/- are concerned, it was submitted that the amount was received from Tata Ltd. London. The said amount was received by them from Korf Organization. Accordingly, the bank draft of US$ 3,33,025 and £7068.38 represented the amount for payment of

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customs duty. It was, in fact, the receipt of Korf Organization and as such there was no borrowing, as alleged.

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The Ld. Counsel for the appellant also submitted that those bank drafts were received through authorized channels but ignored by the respondent. In fact, there was no element of investment by the appellant for acquisition of the aircraft. In that regard, a reference to the statement of Mr. Russi H. Mody was given. The Ld. Counsel for the appellant further submitted that acquisition, transfer and borrowing of foreign exchange could not be proved by the department. Its burden of proof could not have been shifted on the appellant. The respondent have failed to show that the appellant acquired foreign exchange or transferred it. Even they could not prove borrowing of foreign exchange. The impugned order was yet passed finding contravention of Section 8(1) of the Act of 1973 which is absolutely illegal, thus deserves to be set-aside.

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Appeal filed by Mr. Ishaat Hussain

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5. The Counsel for the appellant- Mr. Ishaat Hussain submits that for alleged contravention of Section 8(1) of the Act of 1973 by the appellant company M/s TKESL, the appellant was also fastened with the penalty by invoking of Section 68(1) of the Act of 1973. The impugned order has been passed in ignorance of the fact that the appellant was

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not in-charge of the Company to make him responsible for the conduct of business. Section 68(1) of the Act of 1973 casts a vicarious liability on those persons who at the time of contravention were in-charge and were responsible for the conduct of the business of the company. One cannot be deemed to be guilty of the contravention. No material was produced by the respondent to show any role of the appellant directly or remotely to prove that he was in-charge of the company at the relevant time, thus responsible for the contravention. The appellant was brought into the picture without any reason and material to show control of the affairs of the appellant company.

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The Ld. Counsel for the appellant further submitted that the entire memorandum does not disclose any allegation against Mr. Ishaat Hussain and accordingly no evidence was produced to show contravention of the provision of the Act of 1973 by him. The prayer was accordingly made to set-aside the impugned order.

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6. The appeals were vehemently contested by the Counsel for the respondent and elaborate arguments were made to contest the appeals. Those arguments would be referred while recording finding to each issue raised by the appellant. It is to avoid repetition of one and same facts and accordingly

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we would now record our finding after analyzing each argument of the parties before us.

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7. We have considered the rival submissions of the parties and scanned the records carefully. The brief facts of the case have been given which show that the appellant company was incorporated as Joint Venture of M/s Tata Iron and Steel Co. Ltd. with M/s Korf K.G. Germany. After formation of the new Company i.e. M/s Tata Korf Engineering Services Pvt. Ltd., it was realized that due to poor airline network in India at the relevant point of time, personnel of M/s Korf K.G. Germany were facing difficulty in travelling from one destination to another. This culminated in import of aircraft. The investigation emanated from a letter dated 26.05.1988 written by Dr. Willy Korf of M/s Korf K.G. Germany addressed to Mr. Aditya Kashyap, Director of M/s Tata Korf expressing his intention to place an aircraft at the disposal of the company for use of its officials. On receipt of the said letter, the appellant – M/s Tata Korf vide their letter dated 26.07.1988 / 02.08.1988 sent an application to Chief Controller of Imports and Exports for Custom Clearance Permit (CCP). The said application was signed by Mr. Adiya Kashyap to intimate that M/s Korf K.G. Germany would bear the cost of the aircraft as well as the payment of customs duty. The Company also submitted that an application in

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Form-G for import of 1982 Cessna Citation II model showing it to be a gift. The CIF value mentioned in the application was Rs.2,39,68,000/-. The donor name mentioned as “M/s Korf K.G., Germany”. The application was required to be supported by an affidavit of the donor duly attested by the Judicial Authority or Notary Public or a Certificate from employer that gift was out of foreign exchange arranged by the donor. It is a fact that while the appellant company filed all the necessary documents but affidavit, as required, was not submitted.

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After processing the application, the Controller of Imports and Exports issued CCP which was amended on 09.10.2009 when a decision was taken to import 1986 Cessna Citation II aircraft in place of original plan to import of 1982 Cessna Citation II. On 25.10.1990, Bill of Entry for home consumption was filed by the Shipping and Clearing Department of M/s TISCO where the name of the importer was mentioned as M/s Tata Korf Engineering Services Ltd. with an invoice value of US$ 17,30,000. As per the condition of CCP, the customs duty was payable by the overseas party. The appellant company received three Bank Drafts for US$ 333025 of Swiss Bank Corporation in favour of M/s Tata Korf which was received from M/s Tata Inc. New York, USA. The other two drafts were issued by Bank of India, London for

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£3270.20 & £3798.18 equivalent to Rs.1,13,902/- and Rs.1,32,292/-. Those drafts were received by M/s Tata Ltd., London in favour of appellant’s company.

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After completion of all the required formalities, the aircraft arrived in India and upon application, a certificate of registration from Civil Aviation Department was obtained on 26.10.1990. The certificate therein disclosed the name of the appellant company to be the owner of the aircraft.

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It is a case of the appellant that a Resolution was passed by the Board of the Company in its meeting 26.06.1991 to treat the aircraft as an asset and capitalized the same in the books of accounts. However, in subsequent Board meeting held on 27.05.1992, the company decided to remove the aircraft from the schedule of fixed assets in the absence of capitalized amount. The due information about it was given to the authority with a request to make necessary change and not to treat the aircraft to be a gift to the appellant company. It was duly endorsed in their favour.

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8. According to the appellant, aircraft was purchased by Mr. Willy Korf to place it in India to facilitate their personnel for travelling while according to the respondent no evidence was produced to show the payment of aircraft by Mr. Willy

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Korf. Rather, according to the respondent, all the evidence collected by them indicate purchase of an aircraft at the instance of the appellant company and it was not by Mr. Willy Korf. The aforesaid issue is to be answered in these appeals and for that we would first refer to the evidence produced by the respondent.

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9. The respondent found that the appellant failed to produce any material or proof to show that the aircraft was purchased by Mr. Willy Korf. The appellant company is said to have disassociated themselves from the acquisition of aircraft. According to them, the aircraft was purchased by Dr. Korf of West Germany and was placed with the appellant company. According to the appellant, the payment of the aircraft was made by Mr. Willy Korf, who was none else but even the Director of the appellant company, but no document to this fact was submitted to make the things clear. According to the appellant, burden was on the respondent to prove the contravention of Section 8(1) of the Act of 1973 which they failed to prove and thereby the impugned order is unsustainable.

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10. In the light of aforesaid, we need to go deep into the matter. In the beginning, Dr. Willy Korf addressed a letter to Mr. Aditya Kashyap showing his intention to place aircraft

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for the convenience of the personnel but thereupon no other evidence exists to show its purchase by Dr. Willy Korf. In fact, during the course of the investigation, the Department conducted overseas enquiries and gathered evidence in the form of deposition of Shri James Patrick Kerrigan of M/s U.S. Aircraft Sales Inc. Shri James Patrick Kerrigan furnished documents in respect of purchase of aircraft has been duly discussed by the authority below.

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In the deposition Shri Kerrigan categorically stated that Shri Raj Kadan of M/s Tata Inc. USA had written a letter to his company i.e. M/s USASI, Virginia, USA to show his intention for purchase of aircraft and had specifically written that aircraft would be registered in the name of M/s Tata Korf Engineering Services Ltd. The said letter dated 16.07.1990 is a part of the record and was furnished by Mr. Kerrigan. The summary of those letters and correspondence are as under:-

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“On behalf of Tata Korf Engineering Services Ltd. we offer to purchase the Cessna Citation S II aircraft (Sl. No. 089) for a total sum of US$. 27,00,000…….”

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“…….. we shall arrange to telex transfer our refundable deposit of US$. 2,70,000 to your account no.011-031-43-2 with Chemical Bank, New Jerssey, N.A. …….”

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“…….. Balance of purchase money, i.e. US$ 24,30,000 will be tendered at final closing in exchange for delivery of the aircraft to purchaser at Premier Air

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Centre, Alton, Illinois in airworthy condition with all systems operational and with a bill of sales conveying good title closing to be on or about 30 July, 1990……”

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It is a fact that apart from aforesaid material, the respondent produced many other documents which includes telefax message dated 23.07.1990 sent by Shri R. Kadan to M/s USASI. The relevant portion of said message is quoted hereunder:

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“ (i) “….further to our telecon today, this is to confirm that the balance purchase price of US$ 24,30,000 is being transferred to Insured Aircraft Escrow Account as per details given by Mr. Woodford. The value date of these funds will be 24 July, 1990…”

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(ii) “I note that you will commence necessary modifications as agreed at the premier Air Centre Alton…”

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(iii) “…. As agreed, you will cover the aircraft under your insurance policy from the time of completion until the aircraft’s arrival in India….”

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(3) A copy of the letter dated 26.7.90 from USASI to R. Kadan (faxed on 27.7.90) requesting to remit US$ 42,704 by wire towards modification of the aircraft.

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(4) A copy of the telefax message dated 31.7.90 from Sh. R. Kadan to USASI informing that he has arranged a wire transfer of US$ 42,704 to USASI’s Account with the Chemical Bank, New Jersey and he needs invoices from Premier Air Center for the modification.

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(5) A copy of the telefax dated 17.9.1990 to USASI from R. Kadan informing that the registered owner of the aircraft would be:

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“Tata Korf Engineering Services Ltd. 43, Chowringhee Road, Calcutta-700071. India

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(6) A copy of the telefax dated 26.9.90 from USASI to Mr. R. Kadan showing the revised balance for a total sum of US$.73,944.32 alongwith its break up.

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(7) A telefax message dated 10.10.1990 from Sh. R. Kadan to USASI confirming that the amount of US$. 73,944.26 had been wire transferred to USASI’s account on 9.10.1990.

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(8) A copy of invoice dated August 1990 to Tata Korf for $.9785 from USASI for sale of black boxes and certification.

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(9) A list of owners of Cessna Citation aircrafts imported by Tata Korf, showing the following particulars, amongst other:

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“S 550-0089 Citation S/II – 1986 N 12745 Cessna 4/86, Graybar Electric Co. 8/86 N 134 GB 10/86 US Aircraft Sales Inc 7/90 VT-RHM Rusi H. Modi / Tata Engineering Services Ltd., Calcutta 10/9- VT-ETG/94

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The material referred to above was relied by the respondent to prove the purchase of aircraft by the appellant and if it was really purchased by Dr. Willy Korf, in his individual capacity, then being as one of the directors of the appellant’s company, the documents could have been produced to prove payment by him being custodian of the record.

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11. The appellant has submitted that no opportunity of cross-examination of Mr. James Kerrigan was given to them and accordingly the statement made by him could not have

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been relied. We find that a request made by the appellant for cross-examination of Mr. James Kerrigan was accepted by the authority below and accordingly even summons were issued. Mr. James Kerrigan refused to respond to the said request. Thus it is not the case that the authority below did not call the witnesses and otherwise all the relied upon documents were made available to the appellant. Mr. James Kerrigan himself refused to appear before the authority and otherwise what has been relied by the respondent is the document given by Mr. James Kerrigan to show purchase of the aircraft by the appellant company.

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The record, further, shows that USASI was initially contacted by M/s Graybar Electric Company for purchase of the aircraft. However, USASI then received a fax from Mr. Raj Kadan of M/s Tata Ltd. London and offer the purchase of the aircraft on behalf of M/s Tata Korf. The USASI purchased the aircraft from the original owner M/s Graybar Electric Company for US$ 2.5 million and upon the receipt of the order from Mr. Raj Kadan, who agreed to pay the price of US$ 2.7 million. The transaction was processed. It is also part of record that payment for purchase of the aircraft was made electronically. Thus, Mr. James Kerrigan was unable to disclose as to who had sent the payment.

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The fact now remains who is the owner of the aircraft. In the owner list, the name of the owner in acquisition was mentioned as “VT-RHM Rusi H. Modi/ Tata Engineering Services Ltd., Calcutta”. The fact aforesaid is relevant, however, it could have been rebutted by the appellant company by producing documents to show payment for purchase of aircraft by Dr. Willy Korf, who was one of the Directors of the appellant’s company. In any case, the appellant has raised objection to rely upon the evidence of Mr. James Kerrigan. It is submitted that one cannot be prosecuted based on the statement recorded behind the back of the accused. The Ld. Counsel for the appellant raised the issue as if the proceedings were in pursuance to the criminal proceeding or a case of prosecution. It was rather of civil nature and the documents relied by the respondent were otherwise made available to the appellant. The appellants have cited the judgement in the case of Union of India versus Abdul Mohamad reported in (2000) 10 SCC 169 and Shanti Prasad Jain versus Director of Enforcement, FERA reported in AIR 1962 SC 1764 which are in a criminal proceeding and not of civil nature.

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It is a fact that the material and evidence collected during the legally instituted proceeding before the Commissioner specifically appointed for the purpose and

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thereafter the documents were vetted and authenticated by the Embassy and the US Department of State. It is only on completion of the legal formalities, the documents were relied and were taken as admissible in evidence. In this case, respondent produced the evidence to prove their case by producing the material available with them. The burden was shifted on the appellant to prove their case when Dr. Willy Korf was its one of the Directors and custodian of the record. The proceeding before the authority was in civil nature and in fact no prosecution had been lodged in the matter.

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We may refer to the judgement of the Delhi High Court on the burden of proof decided in the case of Prem Singh Chawla Vs. Director of Enforcement reported in 1987 (12) SCC Online Delhi 58. The relevant para of which is quoted hereunder:

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“8. This argument prima-facie is quite contrary to Section 71 of the Foreign Exchange Regulation Act, which lays down that where any person is prosecuted or proceeded against for contravening any of the provisions of this Act or any rule, direction or order made there under, which prohibits him from doing an act without permission, the burden of proving that he had the requisite permission shall be on him. Similarly, presumption of correctness to the documents recovered/seized from the custody or control of any person can also be raised. Heavy onus lay on the accused to prove the contrary. In this case, no attempt has been made by the learned counsel for the petitioner to show as to how the department was under an obligation to abide by the strict rules of evidence or for that matter an adverse presumption can be raised against the department. If a fact, the statement of the

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accused coupled with the entries in the account books and other related documents, recovered from his possession clearly proves the borrowing and lending of foreign exchange/monies to different persons and at different times. In such like cases, it is just not possible for the department nor they are required under law to examine each and every witness who allegedly received the amount as otherwise they themselves would be liable for prosecution. In spite of this difficulty the department did summon and examine few of the witnesses, who during the adjudication proceedings, admitted the receipt of the amount from the appellant and corroborated the entries appearing against their names in the account books. This was the maximum the respondent could do, and they succeeded to establish their case. As regards the first charge of the receipt of Rs. 3,68,000.00 in nine Installments, the Department not only placed reliance on the admission of the appellant but also found corroboration from the account books as well as the letters of the non-residents. The crux of the matter is that the appellant has not been able to furnish any valid Explanation to the receipt of this amount and its disbursement to 48 persons. Admittedly he had no authority or permission from the competent quarters to accept the amounts from a non-resident Indian, and on his instructions to distribute the same to various persons. The appellant has failed to discharge the heavy onus and the courts below in my opinion, were justified in raising the presumption against the appellant. No interference in this finding is called for.”

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The fact now remains that the appellant company has also relied on the letter of Dr. Willy Korf dated 26.05.1988 and 23.07.1992 written to Mr. Benz, Managing Director of M/s Korf Shipping Gmbh stating that Mr. Willy Korf of M/s Korf Shipping desired to place an aircraft in India for his business interest. The letter dated 25.07.1992 of Mr. Hans Jurgan Eckart to M/s Tata Korf wherein it was stated Mr. Korf never wanted to give the aircraft to the appellant company. The letter dated 26.08.1994 and 12.09.1994 from M/s Tata Sons

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Ltd. to M/s Tata Korf is to the effect of funds for purchase of two bank drafts for £ 3270.20 & £ 3798.18 were received from Korf Organization as was informed by M/s Tata Ltd. UK. It shows that the amount was transmitted to show payment of customs duty which is said to be incurred by the appellant company. It is, however, a fact that invoice of the aircraft was received, rather, it was two invoices and it was raised on the appellant company. The company without raising any issue on it, proceeded with clearance of aircraft, payment of customs duty etc. The appellant company did not question the authority of Mr. Raj Kadan but had negotiated and concluded the deal with M/s USASI. It is, however, submitted by the appellant company that even if that was so, no payment was made by them so as to be penalized for the alleged contravention of the Act of 1973. It is stated that no transfer of borrowing of foreign currency was involved in the hands of the appellant so as to be alleged it contravention. In fact, funds for purchase of aircraft were arranged by M/s Korf Shipping Gmbh, Frankfurt as claimed by the appellant on the strength of the letter dated 23.07.1992 of M/s Korf Shipping Gmbh, but no document was submitted to prove actual payment by Dr. Willy Korf. It is, otherwise, a fact that even in the insurance policy, the name of the owner was shown to be M/s Tata Korf. Even in the books of account of M/s Korf KG Germany, the aircraft was not shown to be its assets,

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rather it never found place in any of the books of accounts. It is, otherwise, admitted that the aircraft was never sent back to Mr. Willy Korf or the company alleged to have purchase it, rather it remained till last in India itself.

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The authority below thus recorded findings against the appellant and in favour of the respondent to hold that the appellant company got involved in acquisition of foreign exchange and its borrowing without permission of Authorised Dealer or of the Reserve Bank of India. The draft of US$ 333025 and £ 3270.20 and £ 3798.18 were utilized for payment of customs duty. However, the earlier draft was received from M/s Tata Industries USA and other two drafts from M/s Tata Ltd. London and Sh. Raj Kadan of M/s Tata Inc. who played vital role in arranging the remittances. It is also a case that the appellant company acquired and transferred foreign exchange of US$ 28,26,433.26. The authority thus passed the impugned order holding the contravention.

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12. We do not find any error in findings and otherwise the judgment cited by the appellant would not support a case of civil nature but can be handful in prosecution or criminal case. In substance, we find contravention in Section 8(1) of the Act of 1973 for arranging and transferring foreign

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exchange of US$ 28,26,433.26 as well as borrowing of US$ 333025 and thereupon £ 7068.38.

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The penalty of Rs. 2,00,00,000/- has been imposed on the appellant company under section 8(1) of the Act of 1973 for acquiring and transferring of foreign exchange with separate penalty of Rs. 25,00,000/- for violation of Section 8(1) of the Act of 1973 towards the borrowing of foreign exchange of US Dollars and Sterling Pounds. The appellant company has already deposited 25% of the penalty amount to satisfy the condition of pre-deposit. It was in pursuance to the order of the Calcutta High Court. We find this case to be old by more than 20 years and looking at all the facts, we find a case to make penalty proportionate. It is looking to appeal, evidence available on record and the peculiarity of the facts and thereby we cause interference in the penalty and reduce it to 25% of the amount of penalty imposed by the authority. The amount aforesaid has already been satisfied by the appellant company. Hence the present appeal is partly allowed and disposed of with the aforesaid.

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Appeal of Mr. Ishaat Hussain

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13. We find that penalty of Rs. 5,00,000/- and Rs. 2,00,000/- has been imposed on the appellant for alleged contravention of Section 8(1) of the Act of 1973 for different

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amount. It is for acquisition and also for borrowing. The respondents have, however, failed to show any role of the appellant, Mr. Ishaat Hussain to implicate him as one of the violators of the provisions. He has not been shown to be incharge of the Company or was monitoring the affairs of the company for purchase of the aircraft. The respondents have implicated him for the sake of it without clarifying his role. In the light of aforesaid, we find a case in his favour to cause interference in the impugned order qua Mr. Ishaat Hussain and accordingly the impugned order is set aside qua the appellant. The appeal is disposed of with the aforesaid.

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(Justice Munishwar Nath Bhandari) Chairman

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(Rajesh Malhotra) Member

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NEW DELHI 08^th JANUARY, 2025 ‘MB’

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