The burden of proof for establishing undue hardship for waiver of penalty deposit lies with the applicant, and the balance of convenience is a relevant factor in considering the waiver.

1. The appellant (original petitioner in the writ petition) in the present appeal is aggrieved by the impugned order dated 10-2-2009, whereby the learned Single Judge has only partially waived the amount that the appellant was required to deposit towards pre-deposit for his appeal to be heard.

2.The allegations of the respondent Enforcement Directorate were that the appellant was guilty of contravention of Foreign Exchange Regulation Act, 1973 (hereinafter referred to as FERA), particularly Section 8(1). Apparently her father, Late Satnam Shah opened accounts in Swiss Banks as also in the Midland Bank, (later HSBC), in the U.K. According to the Enforcement Department, the appellant was the joint holder of one account and also was under a duty upon the death of her father in terms of Section 8(1) of FERA to repatriate the funds in the account to India through banking channels. The adjudicating authority had imposed a penalty of Rs. 2.75 crores stating that the appellant had not complied with the duty cast on her to follow the procedure prescribed by FERA and the concerned notifications issued in that regard.

3. The appellant had urged before the Appellate Tribunal that the amount directed to be paid as pre-deposit would result in undue hardship since the appellant had a very meagre source of income. The appellant had also relied on her income-tax returns for the said purpose. It is the contention of the appellant that she had made out a case for undue hardship to be entitled to the relief under proviso to Section 19 Sub-clause (1) of the Foreign Exchange Management Act, 1999 (hereinafter referred to as FEMA).

4. To be entitled to the benefit of the proviso to Section 19(1) of FEMA, the applicant must make out a case that the deposit of the penalty would cause undue hardship to such person and in such circumstances, the Appellate Tribunal may dispense with such deposit subject to special conditions as it may deem fit to impose so as to safeguard the realization of penalty.

5. The Supreme Court in Monotash Saha v. Special Director, Enforcement Directorate 2008 (12) SCC 359 : 86 SCL 121 observed that "undue hardship" is a matter within the special knowledge of the applicant for waiver and has to be established by him. A mere assertion about undue hardship would not be sufficient. "Undue" means something which is not merited by the conduct of the claimant, or is very much disproportionate to it. "Undue hardship" is caused when the hardship is not warranted by the circumstances. For a hardship to be "undue", it must be shown that the particular burden to observe or perform the requirement is out of proportion to the nature of the requirement itself, and the benefit which the applicant would derive from compliance with it. The word "undue" adds something more than just hardship. It means an excessive hardship or a hardship greater than the circumstances warrant.

6. In the present case, no material has been produced or brought to our notice to establish that the appellant actually operated the account in question. In fact, the adjudicating authority in its order dated 7-7-2008, in para 49 observed as follows:

49. All considered, I find that the charges of contravention of Sections 8 (1), 14 and 19(1)(e) of the FERA attributed against the noticee are on sound footing and supported by the facts and evidences like documents received from HSBC Bank (Formerly, Midland Bank Ltd.), St. Clements Danes branch, London and Credit Suisse bank, Geneva. Before the death of her father, the noticee was co-owner of the assets. However, after the death of her father Shri Satnam Shah on 6-12-2000, in her capacity as beneficiary to the foreign currency accounts and authorized person in respect of the shares held/owned by her father, she became absolute owner of the funds lying to the credit of those accounts and the shares held by her father. The fact that Ms. Priya Shah was a co-signatory to the bank accounts and also documents in respect of holdi