Dismissed
Union of India v. Arvind Narottam
Bombay HCFERA/23/2006
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from the order text
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HIGH COURT OF JUDICATURE AT BOMBAY CIVIL…
What the court decided
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
FERA APPEAL NO.19 OF 2006
1. Union of India through,
Dy. Director of Enforcement,
Directorate of Enforcement,
(Foreign Exchange Management
Act) having his office at
Janmabhoomi Chambers,
1st floor, Walchand Hirachand
Marg, Mumbai - 400 001.
2. The Assistant Director,
Directorate of Enforcement,
(Foreign Exchange Management
Act) having his office at
Janmabhoomi Chambers,
1st floor, Walchand Hirachand
Marg, Mumbai - 400 001. .. Appellants.
V/s.
M/s.Bombay Dyeing Manufacturing
Co. Limited, Nieville House,
Kamani Road, Balard Estate,
Mumbai - 400 038 .. Respondent.
WITH
FERA APPEAL NO.20 OF 2006
1. Union of India through,
Asstt. Director of Enforcement,
Directorate of Enforcement,
(Foreign Exchange Management
Act) having his office at
Janmabhoomi Chambers,
1st floor, Walchand Hirachand
Marg, Mumbai - 400 001. .. Appellant.
V/s.
M/s.Arvind Mills Limited,
Naroda Road, Ahmedabad .. Respondent.
WITH
FERA APPEAL NO.21 OF 2006
1. Union of India through,
Asstt. Director of Enforcement,
Directorate of Enforcement,
(Foreign Exchange Management
Act) having his office at
Janmabhoomi Chambers,
2
1st floor, Walchand Hirachand
Marg, Mumbai - 400 001. .. Appellant.
V/s.
Shri Manubhai D. Shah
C/o.M/s.Arvind Mills Limited,
Naroda Road, Ahmedabad .. Respondent.
WITH
FERA APPEAL NO.22 OF 2006
1. Union of India through,
Asstt.Director of Enforcement,
Directorate of Enforcement,
(Foreign Exchange Management
Act) having his office at
Janmabhoomi Chambers,
1st floor, Walchand Hirachand
Marg, Mumbai - 400 001. .. Appellants.
V/s.
M/s.The Standard Mills Co. Ltd.
Mafatlal Centre, Nariman Point,
Mumbai - 400 020 .. Respondent.
WITH
FERA APPEAL NO.23 OF 2006
1. Union of India through,
Asstt.Director of Enforcement,
Directorate of Enforcement,
(Foreign Exchange Management
Act) having his office at
Janmabhoomi Chambers,
1st floor, Walchand Hirachand
Marg, Mumbai - 400 001. .. Appellant.
V/s.
Shri Arvind Narottam,
Managing Director M/s.Arvind
Mills Limited, Naroda Road,
Ahmedabad .. Respondent.
WITH
FERA APPEAL NO.53 OF 2006
1. Union of India through,
Asstt.Director of Enforcement,
Directorate of Enforcement,
(Foreign Exchange Management
Act) having his office at
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Janmabhoomi Chambers,
1st floor, Walchand Hirachand
Marg, Mumbai - 400 001. .. Appellant.
V/s.
M/s.Mafatlal Fine Spg. & Mfg.
Co Ltd., Mafatlal Centre,
Nariman Point,
Mumbai - 400 023. .. Respondent.
WITH
FERA APPEAL NO.54 OF 2006
1. Union of India through,
Asstt.Director of Enforcement,
Directorate of Enforcement,
(Foreign Exchange Management
Act) having his office at
Janmabhoomi Chambers,
1st floor, Walchand Hirachand
Marg, Mumbai - 400 001. .. Appellants.
V/s.
M/s.Mafatlal Industries Limited
Mafatlal Centre, Nariman Point,
Mumbai - 400 038 .. Respondent.
WITH
FERA APPEAL NO.55 OF 2006
1. Union of India through,
Asstt.Director of Enforcement,
Directorate of Enforcement,
(Foreign Exchange Management
Act) having his office at
Janmabhoomi Chambers,
1st floor, Walchand Hirachand
Marg, Mumbai - 400 001. .. Appellants.
V/s.
M/s.Mafatlal Services Limited,
Mafatlal Centre, Nariman Point,
Mumbai - 400 023 .. Respondent.
Mr.R.V.Desai, Sr.Counsel with A.S. Rao with
S.V.Bharucha and Dr.A.H.Bhatija i/b. T.C. Kaushik
for appellant.
Mr.A.S.Doctor i/b. M/s.Kanga & Co. for respondents
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in appeal Nos.19 to 23 of 2006.
Shri Gaurav Joshi with Mohan Salian & B.Das i/b.
Gagrat & Co. for respondents in appeal Nos.53 to 55
of 2006.
CORAM : F.I. REBELLO & J.P. DEVADHAR, JJ.
JUDGMENT RESERVED ON : 27TH JULY, 2007.
JUDGMENT PRONOUNCED ON : 23RD AUGUST, 2007.
ORAL JUDGMENT : (Per J.P. Devadhar, J.)
1. Heard.
2. In all these Appeals the revenue is
aggrieved by the common order passed by the
Appellate Tribunal for Foreign Exchange on 12th May,
2003. By the said order, the Tribunal has set aside
the penalties imposed upon the respondents under the
provisions of FERA 1947 & FERA 1973.
3. According to the revenue, the facts of the
case clearly show that the respondent/assessee had
made payments to a foreign company through an Indian
company in contravention of FERA and, therefore, the
penalties levied upon the respondents ought to have
been upheld by the Tribunal.
4. The controversy in all these appeals being
common, all these appeals are heard and disposed of
by this common order. Although facts in all these
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cases are not in dispute, for easy understanding of
the dispute between the parties, we may note few
facts set out in FERA Appeal No.19 of 2006.
5. The respondent / assessee in FERA Appeal
No.19 of 2006 is a Textile Mill. M/s.Tootals
Broadhurst lee co. Limited, Manchester, London
(hereinafter to be referred as "Tootals")
incorporated in London are world renowned
manufacturers of textiles. Tootals were originators
and inventors of the world famous crease resisting
process known as "tebilized" process having
registered trade mark. The assessee desirous of
acquiring technical know how relating to the
manufacture and treatment of textile materials by
the above method entered into a collaboration
agreement with Tootals on 10th April, 1961
whereunder Tootals agreed to supply technical know
how of tebilized process on the conditions set out
in the said agreement. Consideration for supply of
technique and services to be rendered by Tootals was
termed as royalty.
6. On 7th November, 1960, the Government of
India approved the above agreement only for the
period from 10th April, 1961 to 10th August, 1969.
Accordingly, the aforesaid collaboration agreement
came to an end on 10th April, 1969. The assessee
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applied for renewal of the agreement and pending
decision of the renewal, Tootals continued to render
services as per the agreement.
7. M/s.Mettur Beardsel Limited (hereinafter to
be referred to as "MBL"), an Indian company was
registered in the year 1926. Tootals at the
relevant time had 48% share holding in MBL.
8. It is the case of the assessee that MBL was
in possession of the technical know-how relating to
tabilized process from Tootals and accordingly the
assessee entered into an agreement with MBL on 29th
December, 1970 and on receipt of the technical
know-how made payments to MBL as per the agreement
dated 29th December, 1970.
9. According to the revenue the payments made
by the respondent to MBL were in fact payments made
to Tootals for rendering the services without the
approval of RBI. Accordingly, show cause notices
were issued and penalty was imposed upon the
assessee and its directors. On appeal, the Tribunal
set aside the penalty. Hence, these appeals.
10. Mr.Desai, learned Senior Advocate strongly
urged before us that in the present case, instead of
making payments to Tootals, a foreign company, the
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assessee had made payments to MBL which is an Indian
subsidiary of Tootals. Such payment was not
approved by R.B.I. Therefore, there was clear
violation of the provisions of FERA. Under Section
5 of FERA, any payment made to an Indian party for
and on behalf of a foreign party without the general
or special permission of the R.B.I. is punishable.
In the present case, the Tribunal without giving any
reasons has set aside the adjudication order.
Accordingly, Mr.Desai submitted that the order of
the Tribunal suffers from serious infirmities and
the said order is liable to be quashed and set
aside.
11. Mr.Dada, learned Senior Advocate, appearing
on behalf of the assessee, took us through the
reasoning given by the Tribunal for setting aside
the penalty and submitted that in view of the
overwhelming evidence on record the Tribunal was
justified in deleting the penalty.
12. We have carefully considered the rival
submissions. In the present case, on consideration
of incriminating letters and documents provided by
MBL, the Tribunal held that there is strong
indication that Tootals had some interest in the
transaction with MBL but it is not clear that
Tootals were the ultimate beneficiaries. In the
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absence of any direct or indirect evidence in that
regard, the Tribunal held that the inference drawn
by the Special Director is based on suspicion and
not on a positive material.
13. The further finding of fact recorded by the
Tribunal is that the agreement between the assessee
and MBL was valid and legal agreement and the
payments made by the assessee in Indian rupee to MBL
did not require approval of R.B.I. The Tribunal has
recorded a finding that Tootals had only 48% share
in MBL and not control over MBL. The fact that the
Tootals permitted MBL to render technical services
and advertise the trade mark in India and charge
service fee etc. cannot be construed to mean that
MBL received payment for and on behalf of the
Tootals. The Tribunal had recorded a finding that
there is no evidence or any finding that any
dividend was received by Tootals from MBL.
14. All the above findings recorded by the
Tribunal are findings of facts and those findings do
not give rise to any question of law much less a
substantial question of law.
15. Accordingly, we do not find any merit in
these appeals and the same are hereby dismissed.
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(F.I. REBELLO, J.)
(J.P. DEVADHAR, J.)
Union of India
Bombay Dyeing Manufacturing Co. Limited
Arvind Mills Limited
Manubhai D. Shah
The Standard Mills Co. Ltd.
Arvind Narottam
F.I. REBELLO
J.P. DEVADHAR
As recorded by the court registry
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