FINAL ORDER

08.04.2024

FPA-FE-43&44/BNG/2023

By this appeal under Section 19 of Foreign Exchange Management Act, 1999 (hereinafter referred to as `FEMA‘), the challenge is made to the order dated 22.03.2023 passed by the Adjudicating Authority imposing the penalty of Rs.20 crores on M/s Shell India Markets Pvt. Ltd. and Rs.5 crores on the co-appellant Shri Nitin Prasad, Director of M/s Shell India Markets Pvt. Ltd. It was for contravention of Section 6(3)(b) of FEMA read with Para 9(1)(A) of Schedule I annexed to Regulation 5(1) of Foreign Exchange Management (Transfer or Issue of Security By a Person Resident Outside India) Regulations, 2000 (in short ‘the Regulation of 2000). The penalty was imposed on delay of 24 days in reporting of the Foreign Direct Investment (FDI) of USD 3,09,00,000 equivalent to Rs.204,91,04,000/- to the RBI.

2. Learned counsel for the appellants submitted that M/s Shell India Markets Pvt. Ltd. is one of the well-diversified international energy companies in the Oil and Gas sector in India. Reserve Bank of India (RBI) vide its Circular No.77 dated 12.02.2015 initiated online filing of (i) Advance Remittance Form (ARF) to report FDI inflows; and (ii) Foreign Currency Gross Provisional Return (FCGPR) Form to report issue of eligible instruments to the overseas investors. The online reporting on the e-Biz platform from 12.02.2015 was in addition to the manual system of reporting.

3. The RBI vide its another Circular No. 9 dated 21.08.2015, in order to promote and ease reporting transaction under FDI enabled online filing of the Foreign Currency Transfer of Shares (FCTRS) convertible debentures etc. from a person resident in India or vice versa. It was again in addition to manual operation. On 01.02.2016, RBI issued another Circular to provide online filing of the ARFs from 08.02.2016. The physical filing of the form was discontinued.

4. The appellant received the FDI of USD 3,09,00,000 equivalent to Rs.204,91,04,000/- under automatic route of FDI policy of the Government of India. The receipt of FDI was permissible under Section 6 of FEMA for which no prior approval of the RBI or Government of India was required in terms of Regulation of 2000.

5. The appellant Company faced teething issues and difficulties in online filing system as it was relatively new thus the delay of 24 days occurred in reporting FDI remittance. The appellant Company reported the FDI through the Standard Chartered Bank on 13.06.2016. An application for condonation of delay in filing ARFs was submitted to the RBI on the ground that the Company attempted to file the reporting within the stipulated time, however, on account of teething problem in the online filing system, unwarranted delay in the reporting occurred. The RBI was further requested to allot the UIN against those ARFs. The appellant was allotted the UIN post reporting of the remittance thus it impliedly means condonation of delay by the RBI.

6. It is after six years that on 13.07.2021 an order under Section 37 of FEMA read with Section 133(6) of IT Act, 1961 was issued by the Assistant Director, Directorate of Enforcement to Standard Chartered Bank directing it to furnish the records of appellant company within six days. The Standard Chartered Bank furnished the adequate details on 31.08.2021 and 06.12.2022. The summons were issued thereupon by the Directorate of Enforcement to the appellant calling for their presence. After appearance, the appellant Company had given required information. However, on 02.01.2023, a complaint was filed under Section 16(3) of FEMA by the Assistant Director, Directorate of Enforcement before the Adjudicating Authority alleging violation of Section 6(3)(b) of FEMA and Regulation 5(1) of Regulation of 2000. It was in ignorance of the fact that Section 6(3)(b) of FEMA had already been repealed. In any case, a show cause notice was sent by the Adjudicating Authority to the applicant. A reply to the show cause notice was given by the appellant vide its le