APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI (1) FPA-FE-140/KOL/2023 Vikram Swarup … Appellant (2) FPA-FE-141/KOL/2023 Gaurav Swarup … Appellant Versus Directorate of Enforcement, Kolkata … Respondent Advocates/Authorized Representatives who appeared For the Appellants : Shri Chinmoy Pradeep Sharma, Shri Debangshu Dinda, Advocates For the Respondents : Shri Varun Mishra, Advocate CORAM JUSTICE MUNISHWAR NATH BHANDARI : CHAIRMAN SHRI G.C. MISHRA : MEMBER

FINAL ORDER

05.01.2026 Two appeals have been filed under Section 37A of the Foreign Exchange Management Act, 1999 (in short `the Act of 1999’) to challenge the order dated 10.11.2023 passed by the Commissioner of Customs (Appeals), Kolkata.

Brief facts of the case:

2. On the basis of information, a search operation was conducted on 14.09.2022 where several incriminating documents were seized from the residential premises of the appellants. Their statements were recorded on five different dates and the appellants were confronted with crucial documents and were asked to explain their association with the foreign assets lying with M/s EEL. The appellants failed to provide proper explanation for the said foreign exchange held by them outside India. The order of seizure was issued on 01.06.2023 by the Assistant Director, Directorate of Enforcement under Section 37A(1) of the Act of 1999.

3. During the course of investigation, it was revealed that peak balance of USD 4,619,734.20 equivalent to Rs.30,60,11,193/- was held outside India in contravention of Section 4 of the Act of 1999. Therefore, the equivalent value of the property of the appellants situated in India to the tune of Rs.30,60,11,193/- was found liable to be seized in terms of Section 37A of the Act of 1999. A seizure order was passed on 01.06.2023 and accordingly the Demat accounts of the appellants were seized.

4. The petition was filed by the respondents to seek confirmation of the seizure order dated 01.06.2023 and the prayer aforesaid was taken up by the authority below who passed the impugned order to hold the seizure order to be legal and proper. Aggrieved by the aforesaid order, the present appeals have been filed.

Arguments of counsel for the appellants:

5. The learned counsel for the appellants submitted that the alleged contravention of the provisions of the Act of 1999 is in reference to foreign exchange amounting to USD 4,619,734 held in two foreign bank accounts. Those two foreign bank accounts were belonging to Epsilon Enterprises Ltd., a company incorporated in the British Virgin Islands. The KVC document of Juluis Bar pertaining to Episilon Enterprises Ltd., Seychelles dated 29.10.2015 was evidenced for the aforesaid. Section 37A(1) of the Act of 1999 shall only apply where a person resident in India is suspected to `hold’ foreign exchange outside India. The facts on record shows that the appellants were not falling in that category. They cannot be said to be `holding’ or ever `held’ any foreign exchange in contravention of Section 4 of the Act of 1999. The respondents failed to make differentiation between the company and the individual. The company is an artificial juridical person having a separate legal identity, distinct from its members. The Members/Directors of a company cannot be considered owners of the company’s assets. In fact, the respondents failed to make distinction between the asset of the company and of the individual and for that corporate veil ought to have been pierced to treat the foreign exchange in the foreign bank accounts as being `held’ by the appellants. The counsel referred to the word `held’ which means that a person should be holding foreign exchange outside India in contravention of Section 4 of the Act of 1999 but in this case, the respondents failed to make distinction between the two. They even failed to accept the affidavit of Mr. Arun Mittal, who was the actual and lawful owner of the bank accounts. Hence, the proceedings should not have been taken up against the appellants.