Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(ATFP) 82

APPELLATE TRIBUNAL FOR FORFEITED PROPERTY
BALESH KUMAR, Member, RAJESH MALHOTRA, Member
M/s Siri Sea Products Pvt. Ltd. – Appellant
Versus
The Special Director, The Directorate of Enforcement, Hyderabad – Respondent
MP-FE-586/HYD/2019 (Exemp.)|MP-FE-585/HYD/2019 (A.D.)|FPA-FE-88/HYD/2019|MP-FE-150/HYD/2023 (Exemp.)|FPA-FE-56/HYD/2023

Advocates:
For the Appellants/Petitioners: Mr. T. Sundar Ramanathan, Adv., Ms. Sukanya Viswanathan, Adv.
For the Respondents:Mr. Mohd. Wasay Khan, Advocate

The tribunal established that FEMA's regulatory framework extends to the Exclusive Economic Zone, mandating compliance with export regulations regardless of challenges faced, with penalties imposed based on statutory contraventions rather than intent.

Headnote:(A) Foreign Exchange Management Act, 1999 - Sections 6, 7, and 14C - Imposition of penalties for contraventions regarding export regulations, involving penalties of Rs. 80,90,000/- and Rs. 2,10,000/- on the company and its Managing Director, respectively - Compliance with export documentation requirements was not observed, leading to contraventions. (Paras 1, 3, 5, 7, 13, 21)

(B) Jurisdiction - The competence of authorities under FEMA to adjudicate was upheld, rejecting claims of dual adjudicating entities as unsubstantiated. (Paras 9, 14)

(C) Exclusive Economic Zone - The argument of extending FEMA's applicability to the EEZ requires specific notifications, but the tribunal found the existing regulations sufficient. (Paras 20, 21)

(D) Mens Rea - It was not necessary to establish a guilty intention for imposing penalties under civil obligations, as contraventions of FEMA are civil in nature. (Paras 29, 31)

Facts of the case:
The Appellant company entered into agreements to manage vessels for fishing activities but failed to adhere to FEMA requirements regarding export, leading to penalties.

Findings of Court:
Penalties were reduced to Rs. 8,00,000/- for the company and Rs. 20,000/- for the individual appellant due to insights into financial challenges and operational difficulties.

Issues: The tribunal addressed the authority's competence to enforce FEMA against the appellant, the applicability of FEMA to the EEZ without explicit notification, and the nature of penalties in civil matters.

Ratio Decidendi: The tribunal affirmed that the enforcement authorities had the competency to adjudicate and that non-compliance with export regulations resulted in penalties independent of intentions.

Result: Appeals partially allowed with penalties reduced.

FINAL ORDER

29.01.2026

This Order disposes of the Appeals Nos. FPA-FE-88/HYD/2019 filed by M/s Siri Sea Products Pvt. Ltd. (SSPL) and FPA-FE- 56/HYD/2023 filed by Shri Pentapati Lakshman Swamy, against the Order No. SDE/SRO/HYZO/04/2019(SK) dated 27.09.2019 (Impugned Order), passed by the Special Director, Enforcement Directorate, Government of India, Chennai. The Ld. Adjudicating Authority (AA) imposed the cumulative penalty of Rs. 80,90,000/- on the Appellant Company comprising of the following:

a. Rs. 2,30,000/- for the contravention of Section 7 (1) of FEMA read with Regulation 3 of the Foreign Exchange Management (Export of Goods and Services) Regulations 2000 to the extent of US $ 1,63,100 (Rs. 75,69,471/-).

b. Rs. 78,60,000/- for the contravention of Regulation 14 C of Foreign Exchange Management (Export of Goods and Services) Regulations 2000 to the extent of US $ 57,11,045 (Rs. 26,21,36,965/-).

The individual Appellant Shri Pentapati Lakshman Swamy, who was the Managing Director of the Company was penalized for the aforementioned contraventions in terms of Section 42 (1) of FEMA . Correspondingly the penalty amounts imposed on him were Rs. 10,000/- and Rs. 2,00,000/- totaling Rs. 2,10,000/-.

2.This Tribunal vide Order dated 01.09.2023 had directed the Appellants to make pre-deposit of 10% (approximately) of the penalty amount viz Rs. 8,00,000/- by the Appellant Company and Rs. 20,000/- by the individual Appellant. The Tribunal has recorded on 08.05.2024 that the said pre-deposit Order has been complied with.

3.Briefly, the facts of the case are that SSPL entered into a Vessel Management Agreement with M/s Ocean Grace Co. Pte Ltd., Singapore on 16.05.2003, in terms of which M/s Ocean Grace was required to purchase entire fish catch and other marine products from SSPL at mutually agreed price. It was further agreed that M/s Ocean Grace shall pay in advance for the vessels and for the mid sea bunkers / stores /provisions for fishing operations. The cost of such supplies shall be adjusted against the invoices raised by SSPL for the catches exported by them. M/s Ocean Grace, thereby shall adjust and deduct all the advance remittances & other payments made on behalf of SSPL to the suppliers of bunkers, baits, vessel maintenance & repairs and salaries to the foreign crew, etc. During the course of the investigation, it was revealed that the individual Appellant herein was in-charge of the Company and responsible for the conduct of business of the Company. The Company had obtained permission for the import of fishing Trawlers vide letter No. 21002/14/2002-FY (Ind) dated 31.07.2003 from the Ministry of Agriculture, Government of India. The Company also obtained Loan Registration No. 2003974 from the Reserve Bank of India (RBI) vide letter No. DESACS/BPSD/7364/04.61.19/2005-06 dated 23.06.2006. The Appellant Company imported 4 fishing vessels from M/s Ocean Grace Company Pvt. Ltd., Singapore, valued at US $ 16,00,000/- vide Bills of Entry Nos. 060633-36 dated 01.08.2003. They surrendered all the 4 vessels to their suppliers on 09.03.2009 and the surrender intimation was given to the Agriculture Ministry, Government of India. Even after surrender of vessels, the Appellant Company remained liable for payment of outstanding amount of US $ 1,63,100 to the foreign supplier, after having paid US $ 14,36,900 towards cost of the vessels in instalments. They were holding their bank account with Karur Vysya Bank, Visakhapatnam.

4. Ld. Counsel for the Appellant challenged the competency of the Officers of the Respondent Directorate to enquire and adjudicate matters relating to Section 7 (1) (a) of FEMA , since the Counsel contended that it is only the Officers of the Department of Customs and Excise, who have such competency under the Notification No. S.O. 1155 (E) dated 26.12.2000. Ld. Counsel argued that the emphasis in the Impugned Order that there is no explicit bar on the jurisdiction of the Officers of the Respondent Directorate is mispla

Click Here to Read the rest of this document

2026 Supreme(Online)(ATFP) 82

The tribunal established that FEMA's regulatory framework extends to the Exclusive Economic Zone, mandating compliance with export regulations regardless of challenges faced, with penalties imposed based on statutory contraventions rather than intent.

Cases Referred (2)