FINALORDER

03.09.2024 This Order disposes of the Appeal No FPA-FE-16/BBS/2022 filed by the Directorate of Enforcement through Assistant Director situated at Bhubaneswar against the Order No. SDE/ER/BBZO/01/2022(SA) dated 09.02.2022 passed by the Special Director (Eastern Region), Directorate of Enforcement, Kolkata. The Ld. Adjudicating Authority imposed a penalty of Rs 10,00,000/- on M/s Orissa Sponge Iron & Steel Ltd (“Respondent No. 1”) for the contravention of Paragraph 9(1)(B) of the Schedule 1 to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 (“FEMA Regulations, 2000”) as notified by the Reserve Bank of India (RBI) vide Notification No. FEMA 20/2000-RB dated 03.05.2000 in terms of exercise of the powers conferred by Clause (b) of Sub-

section (3) of Section 6 and Section 47 of the Foreign Exchange Management Act, 1999 (FEMA). For the aforementioned contravention read with Section 42 of FEMA, a penalty of Rs 5,00,000 was imposed on Shri Muni Kamal Mohanty, Director of the Company (“Respondent No. 2”).The total penalty amount of Rs 15,00,000/- has been deposited.

2. Ld. Counsel for the Appellant has argued that the Ld. Adjudicating Authority failed to appreciate that the penalty was meagre in comparison to the amount involved in the contravention of the FEMA Regulations, 2000. The Respondents had failed to report and submit Form FC-GPR within 30 days from the date of issue of shares against foreign direct investment of Rs. 67,50,00,000/-.

3. Ld Counsel for the Appellant informed that the Respondent No. 1, vide letter dated 12.01.2008 had intimated the Reserve Bank of India of three inward remittances received from overseas investors for issuance of shares of the Respondent Company. However, the RBI vide letter dated 29.11.2017 intimated the Appellant Directorate that the Respondent No. 1 had not submitted the Form FC-GPR within the stipulated time period, in pursuance of the compliance of Paragraph 9(1)(B) of the Schedule 1 to FEMA Regulations, 2000. The Ld. Counsel further informed that the Respondent No. 2 was the Director of the Company at the relevant timeand was responsible for its day to day operations.

4. Ld. Counsel contended that the Ld. Adjudicating Authority while imposing the penaltieshas failed to take into consideration that the amount involved in the contravention is Rs. 67,50,00,000/-. The Ld. Counsel further argued that the penalty imposed under the impugned order is bereft of any rationale as it is the result of arbitrary exercise of discretion by the Ld. Adjudicating Authority. The Ld. Counsel furthermore argued that the meagre and insufficient penalty frustrates the purpose and object of the FEMA Act, 1999, and it would thus fail to secure the strict compliance to the Act and its Regulations.

5. Ld. Counsel further stated that the Respondent No. 1 has not as yet complied with the said requirement of reporting/ submitting Form FC-GPR. The Ld Counsel for the Appellant prayed for allowing the present appeal so as to enhance the penalty amounts imposed on the two Respondents.

6. Ld. Counsel for the Respondents stated that the Respondent(s) have complied with the provisions of Paragraph 9(1)(A) of the Schedule 1 to FEMA Regulations, 2000. It is not disputed that the RBI in its letter dated 29.11.2017 to the Appellant, had informed that the Respondents vide letter dated 12.01.2008 had reportedthe receipt of three inward remittances from three entities abroad for issuance of shares in the Respondent Company. The Ld. Counsel drew attention to their letter dated 12.01.2008 to RBI about allotment of 30 lakhs equity shares to the foreign investorsso as to satisfy the requirement of Paragraph 9(1)(A) which is admittedly part of the Appeal Paper Book. The Ld. Counsel further informed that the Respondent(s) have discharged their penalty obligation arising out of the impugned order.

7. The Ld. Counsel argued that the only contravention on the part of the Resp