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2025 Supreme(Online)(ATFP) 437
APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI FPA-FE-133/HYD/2020 Union of India, Through DLA, ED, Hyderabad … Appellant Versus M/s. Peritus Corporation Pvt. Ltd., Hyderabad & Anr. … Respondents Advocates/Authorized Representatives who appeared For the Appellant : Mr. Pranav Mishra, Adv. For the Respondents : Ms. Siri Reddy, Advocate CORAM SHRI G. C. MISHRA : MEMBER
The court ruled that technical breaches of foreign exchange regulations should not attract excessive penalties where no substantive harm or malicious intent is evident.
Headnote:(A) Foreign Exchange Management Act, 1999 - Section 6(3)(b) - Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 - The Appellant appealed against the minimal penalty of Rs. 2 lakhs imposed for technical contraventions and argued it was insufficient given the gravity of violations - The Ld. AA held that the Respondents contravened regulations by failing to file Form FC-GPR with full particulars within the timeframe. (Paras 2, 3, 10, 12)
(B) Technical Breach - The Court held that technical breaches should not attract severe penalties if no economic prejudice occurred or malicious intent was found - The appellate authority found no grounds to enhance penalties established by the Ld. AA, ruling that the penalties were judicious. (Paras 13, 17)
Facts of the case:
The Appellant contended that the Respondents failed to file necessary forms under FEMA regulations, leading to technical breaches of considerable monetary sums, yet no malafide actions were established.
Findings of Court:
The appeal lacked merit, and the penalties imposed were fair given the circumstances of the technical breach without significant economic impact.
Issues: The central issues were whether the penalties were proportionate to the contraventions and whether the Respondents genuinely breached FEMA regulations.
Ratio Decidendi: The authority can impose minimal penalties on technical breaches where no economic harm can be demonstrated, and findings must reflect judiciousness and fairness.
Result: The appeal is dismissed being devoid of any merit.
FINAL ORDER
19.06.2025
The present Appellant has filed the Appeal against the order no. JD/AG/01/HYZO/2020 dated 31.07.2020 of the Ld. Adjudicating Authority (Ld. AA) wherein it was held that M/s Peritus Corporation Private Limited (Respondent No. 1 herein) and Shri Mavuleti Ram Prasad Varma, Director of M/s Peritus Corporation Private Limited (PCLP) (Respondent no. 2), contravened Section 6 (3)(b) of FEMA , 1999 r/w Para 9(1)(B) of Schedule I to the Foreign Exchange Management (Transfer or Issue of security by a person resident outside India) Regulations, 2000. The Ld. AA imposed a penalty Rs. 1,00,000/- on each of the Respondents on the basis of discussions made in the impugned order which are not repeated for the sake of brevity.
2. The Ld. AA held that the evidence available on record suggest that Respondent No. 1 received foreign inward remittances equivalent to Rs. 5,00,09,003/-during the period between 13.01.2014 to 17.01.2014. It is seen that the said foreign inward remittances were reported within the stipulated time to RBI and also that the allotment of shares was also done within the stipulated timeline prescribed under FEMA . Upon allotment of shares to the foreign investor, a compliance under FC-GPR is required to be filed within 30 days of allotment of shares to RBI though their Authorized Dealer (AD) bank. In this case, it is found that the company has filed FC-GPR for the allotment of shares with their AD bank for onward submission to RBI well within 30 days of allotment of shares. However, it is found that the said FC-GPR filed by Respondent no. 1 has not been taken on record by the RBI owing to pending clarifications from the Respondent 1 with regard to (i) to submit the revised FCGPR authenticating the deletion in the declaration part of FC-GPR (ii) to submit original certificate from the CA, CS with correct name of the investor.
3. The Ld. AA found that Respondent no. 1 had contravened the provisions of Section 6 (3)(b) of FEMA ,1999 r/w Para 9(1)(B) of Schedule I to the Foreign Exchange Management (Transfer or Issue of security by a person resident outside India) Regulations, 2000, as the Company failed to file Form FC-GPR with RBI with in specified time with full particulars involving an amount of Rs.5,00,09,003/- and that it is a technical contravention. Further, it also held that Respondent no. 2, who is responsible to conduct the business and other activities of the company is guilty of contravention of provisions Section 6 (3)(b) of FEMA , г/w Para 9(1)(B) of Schedule I to the Foreign Exchange Management (Transfer or Issue of security by a person resident outside India) Regulations, 2000 in terms of Section FEMA , 1999.
Submissions of the Appellant:
4. The Ld. Counsel of the Appellant, during the course of final hearing, submitted that the Ld. AA imposed a minimal penalty of Rs. 2 lakhs (Rs. 1 lakh on each Respondent) which is not in line with the grave contravention committed by Respondents without considering the quantum of contravention and that though the Ld. AA categorically held that Respondent No. 1 had contravened Section 6 (3)(b) of FEMA read with Para 9(1)(B) of Schedule-l to the Foreign Exchange Management (Transfer or Issue of Security by a person resident outside India) Regulations, 2000, by not filing the mandatory Form FC-GPR with the Reserve Bank of India within specified time with full particulars involving an amount of Rs. 5,00,09,003, but levied a very low penalty totaling Rs. 2 lakhs which does not commensurate with the contravention committed by the respondents without assigning any proper reasons and that the Ld. AA has ignored the provisions of Section 13 (1) of the FEMA , 1999, which provides for imposition of penalty up to thrice the sum involved in the contraventions and that the discretion to pass an order of sentence or levy a penalty for breach of any law, of course lies with the judicial/quasi-judicial authorities, however, said discretion is not unfettered and the same h
