Section 64(2) FERA Charge Applies to Any Contravention in India, Covering Both Indian and Foreign Nationals | SAFEMA

Case Details: Alliance Leicestar Plc Ltd. v. Assistant Director, Directorate of Enforcement, Mumbai - [2024] 165 taxmann.com 532 (SAFEMA - New Delhi)

Judiciary and Counsel Details

• Munishwar Nath Bhandari, Chairman & Balesh Kumar, Member
• S. De & Ms V. Mohana, Advs. for the Appellant.
• Pranav Mishra, Adv. for the Respondent.

Facts of the Case

In the instant case, the appellant was a British Bank, and one JB was its Chief Executive Officer (CEO). The appellant had opened a Vostro account with ANZ Grindlays Bank, Mumbai. According to the respondent, certain transactions took place whereby non-resident convertible rupee accounts of the appellant bank in ANZ Grindlays Bank were credited from time to time, pursuant to instructions/demand drafts from 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 crores.

These transfers to non-resident convertible rupee accounts enabled payments to be made in foreign exchange to a person who is a resident outside India. The record reveals that there were telex messages from the Appellant Bank to ANZ Grindlays Bank to ensure that the impugned credits were made to its account with ANZ Grindlays Bank.

Further, Statements of account of the Appellant Bank maintained by ANZ Grindlays Bank showed credits and debits in short intervals. No evidence was placed on record that contraventions by the Appellant Bank had taken place without JB’s knowledge or that he exercised all due diligence to prevent such contraventions.

It was noted that the charge against the Appellant and JB for the aforementioned contraventions of FERA was established, and thus, the penalty had been rightly imposed on the appellant and JB.

Further, it was noted 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 JB were disproportionately higher for a charge of abatement alleged and thus, the same was to be reduced to Rs. 1,00,00,000/- on the Appellant Bank and to Rs. 5,00,000/- on JB, which would meet ends of justice.

SAFEMA Held

The Appellate Tribunal held that abatement charged under Section 64 (2) of FERA is one of several provisions under FERA that apply to a contravention committed in India irrespective of whether the contravener is an Indian national or a non-national.

Further, the Appellate Tribunal held that the effect of any act done outside India is that such act would be deemed to have been done in India.