1. Appeal against penalty and confiscation for contravention of FEMA provisions on acquisition of agricultural land by a non-resident Indian. (Para 1 )
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2025 Supreme(Online)(ATFP) 13378
APPELLATE TRIBUNAL FOR FORFEITED PROPERTY
Balesh Kumar, Member, Rajesh Malhotra, Member
Shri Mohammad Iqbal Siddiqi – Appellant
Versus
The Special Director Directorate of Enforcement Kolkata – Respondent
FPA-FE-17/KOL/2017
Advocates:
For the Appellants/Petitioners: Fuzail Ahmad, Ibad Mushtaq, Gurmeet Kaur
For the Respondents: Vivek Gurnani, Kanishk Maurya
For the Appellants/Petitioners: Fuzail Ahmad, Ibad Mushtaq, Gurmeet Kaur
For the Respondents: Vivek Gurnani, Kanishk Maurya
Omission of a statutory provision is equivalent to repeal, attracting saving clauses under the General Clauses Act, and mens rea is not required for civil penalties under FEMA; penalty must be proportionate.
Headnote:(A) Foreign Exchange Management Act, 1999 (FEMA) - Sections 6(3)(i), 13(1) and (2), 16(3), 19 - Finance Act, 2015 - Section 139
(C) - Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 - Regulation 3(1)(b) read with Schedule II - Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000 - Regulation 3(a) - General Clauses Act, 1897 - Sections 6, 6A and 24 - Penalty and confiscation for contravention of FEMA - Mens rea not required - Omission of provision - Effect of repeal and omission - Applicability of saving clauses - Proportionality of penalty.
(B) Omission of a statutory provision - Distinction between repeal and omission - The omission of Section 6(3) of FEMA by the Finance Act, 2015 was made effective from 15.10.2019 vide notification S.O. 3715(E); hence the provision was in force at the time of the alleged contravention and proceedings initiated under it were valid - The Tribunal relied on the judgments in Fibre Boards Pvt. Ltd. vs. CIT [(2015) 10 SCC 333] and Shree Bhagwati Steel Rolling Mills vs. Commissioner of Central Excise [(2016) 3 SCC 643] to hold that the words “repeal” and “omission” are interchangeable and that the saving provisions of Sections 6, 6A and 24 of the General Clauses Act apply to omissions as well - Thus, the initiation of proceedings after the enactment of the Finance Act but before the effective date of omission was lawful.
(C) Mens rea not essential for imposition of penalty under FEMA - The contravention of a civil obligation attracts penalty irrespective of the intention of the party - The absence of words like “willful”, “deliberately” or “intentionally” in Section 13 indicates that mens rea is not required - Reliance placed on Chairman, SEBI vs. Shriram Mutual Fund & Ors. [(2006) 5 SCC 361] and Director of Enforcement vs. MCTM Corporation Pvt. Ltd.
(D) Confiscation of property under Section 13(2) of FEMA is discretionary and must be exercised judiciously - Where the funding for purchase of agricultural land was from lawful earnings abroad and there was no mis-declaration or underhand dealing, the combined penalty of full value of the land plus confiscation was held to be disproportionate - The Tribunal reduced the penalty from Rs.15,00,000/- to Rs.7,50,000/- (the amount already deposited as pre-deposit) and set aside the order of confiscation.
Facts of the case:
The Appellant, while a non-resident Indian, purchased agricultural land in India using lawfully earned remittances from abroad. The Assistant Director, Directorate of Enforcement imposed a penalty of Rs.15,00,000/- and ordered confiscation of the land for contravention of Section 6(3)(i) of FEMA read with the relevant Regulations, as NRIs are prohibited from acquiring agricultural land. The Appellant appealed, contending that he was unaware of the restriction, that the land was intended for poultry/dairy farming and not agriculture, and that the provision under which he was charged had been omitted by the Finance Act, 2015 before the show cause notice was issued.
Findings of Court:
The Tribunal held that the omission of Section 6(3) took effect only on 15.10.2019, and therefore the provision was in force when the complaint was filed on 22.05.2015. The General Clauses Act’s saving provisions apply to omissions as well. Mens rea is not required for penalty under FEMA. However, considering that the Appellant acted bonafide with lawful funds and no misrepresentation, the penalty was disproportionate. The penalty was reduced to the amount already deposited (Rs.7,50,000/-) and the confiscation order was set aside.
Issues: The main issues were whether the omission of Section 6(3)(i) prior to the show cause notice barred the proceedings; whether mens rea is necessary for imposing penalty under FEMA; and whether the penalty and confiscation were proportionate.
Ratio Decidendi: The Tribunal ruled that omission of a statutory provision is equivalent to repeal for the purposes of the General Clauses Act, and proceedings initiated before the effective date of omission are valid. Mens rea is not an element for breach of civil obligations under FEMA. The discretion to confiscate under Section 13(2) must be exercised judiciously, and where the contravention is technical and without mala fides, the penalty should be proportionate. Result : Appeal partly allowed - the order of confiscation set aside and penalty reduced from Rs.15,00,000/- to Rs.7,50,000/-.
Legal Category Hierarchy
- foreign exchange law
- statutory interpretation
Table of Contents
2. Appellant argued omission of Section 6(3) bars proceedings and penalty disproportionate; Respondent argued contravention strict liability and omission not yet effective. (Para 2 , 3 , 4 , 5 )
3. Appeal partly allowed; confiscation order set aside and penalty reduced. (Para 12 )
4. Does omission of a statutory provision by an amending Act take effect from the date of the amending Act or from a later notified date?
The omission takes effect from the date specified in the notification, not from the enactment date; here, Section 6(3) omission effective from 15.10.2019. (Para 6 , 7 , 8 )
5. Is mens rea required for imposing penalty under FEMA?
No, FEMA imposes strict civil liability; penalty is attracted upon contravention regardless of intention, as held by the Supreme Court. (Para 9 , 10 )
6. Is confiscation of property mandatory under Section 13(2) of FEMA?
No, confiscation is discretionary; the adjudicating authority may order it in addition to penalty, but must exercise discretion judiciously. (Para 10 , 11 )
7. Does the actual use of land determine its legal classification as agricultural land?
No, classification depends on official records and conversion by state government; actual use for non-agricultural purposes does not change the classification. (Para 11 )
FINAL ORDER
29.09.2025
This Order disposes of the Appeal No. FPA-FE-17/KOL/2017 filed by Shri Mohammad Iqbal Siddiqi against the Order dated 09.01.2017 (Impugned Order) passed by Special Director (Appeals-FEMA), Kolkata. The Impugned Order has reiterated the Order in Original No. ADJ/11/LKZO/2016/AD(NBS) dated 30.03.2016 (OIO) passed by the Assistant Director, Directorate of Enforcement, Lucknow. Vide the OIO a penalty of Rs. 15,00,000/- was imposed on the Appellant and his property comprising of agricultural land at Pargana Deva Gram, District Barabanki was confiscated for contravention of Section 6(3)(i) of Foreign Exchange Management Act, 1999 (FEMA) read with Schedule II of Regulation 3 (1)(b) of the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 of Foreign Exchange Management Act, 1999 & Regulation 3 (a) of the Foreign Exchange Management (Acquisition and transfer of Immovable property in India) Regulations, 2000 of Foreign Exchange Management Act, 1999. This Tribunal vide its Order dated 25.09.2024 disposed of the Application for waiver of the pre-deposit of the penalty amount with direction to the Appellant to pay an amount of Rs. 7,50,000/- within eight weeks, so as to meet the compliance to proviso of Section 19 of FEMA.
2. Ld. Counsel for the Appellant prayed that the impugned property was purchased from the lawful earning of the Appellant while he was working abroad. Ld. Counsel further argued that the bona fide of the Appellant cannot be questioned because he was not even aware of the said provision under FEMA. Ld. Counsel for the Appellant argued that while the impugned property was described as agricultural land, it was in fact not being used for agriculture purposes. Ld. Counsel contended that the Appellant purchased the said land to setup a poultry farm and a dairy farm. Ld. Counsel also argued that besides the imposition of penalty of Rs.15,00,000/- which is equal to the amount spent by the Appellant for the purchase of the impugned property, the said property has also been confiscated. Ld. Counsel therefore pleaded that the penal action is more than proportionate of the amount involved in the alleged offence. He pleaded that the Appellant has suffered for long in view of the case as the amount spent in development of a poultry farm could never be put to use to realize any income.
3. Ld. Counsel for the Appellant also contended that Section 6(3) of FEMA was omitted by the Finance Act of 2015 which was notified on 14.05.2015. He further stated that the Complaint under Section 16 (3) of FEMA 1999 was lodged on 22.05.2015 and the Show Cause Notice relating thereto was issued on 22.05.2015. Ld. Counsel contended that no such action could be initiated under FEMA after the relevant provision thereto was omitted on 14.05.2015. The Finance Act 2015 did not provide for any saving clause to save the right to initiate proceedings for liabilities incurred during the currency of the Act. Ld. Counsel further contended that even Section 6 of the General Clauses Act, 1897 will not be applicable to the instant case in view of the omission of the provision itself. In this regard the Judgment dated 04.09.2002 of the Hon’ble Supreme Court in the matter of M/s General Finance Co. & Anr. vs. Assistant Commissioner of Income Tax, Punjab (2002) 7 SCC 1 was cited. He therefore pleaded to allow the Appeal.
4. Ld. Counsel for the Respondent stated that the contravention of FEMA does not require mens rea. Even if the Appellant without intending to contravene the law, remitted lawfully earned savings while being a Non- Resident Indian, the contravention of the provisions of FEMA read with the conditionalities imposed under the Regulations, has occurred. Ld. Counsel for the Respondent further argued that, it is an admitted fact that the property purchased by the Appellant is an agricultural land. The nature of the land cannot be redetermined merely by the fact that it was not used for agricultural purpo
