M/s Woosu Automotive India Pvt. Ltd. vs The Enforcement Directorate Chennai

Headnote:(A) Foreign Exchange Management Act, 1999 - Section 13, Section 19(1), Section 42(1) - Foreign Exchange Management (Transfer or Issue of any security by a Person Resident Outside India) Regulations, 2000 - Para 9(1)(A), Para 9(1)

(B), Para 9(2) of Schedule I to Regulation 5(1) - Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 - Regulation 13.1(3) - Penalty for delayed reporting and non-filing of returns - Mens rea not essential for imposing civil penalties under FEMA - Absence of loss of foreign exchange does not absolve liability - Delay in proceedings does not render them illegal - Quantification of contravention amount based on value of shares issued is correct. (Paras 22-30)

(B) Civil Penalty - Mens rea - The scheme of FEMA, 1999 imposes monetary penalties for contraventions of procedural compliances; absence of intent does not absolve liability - Reliance on Hindustan Steel Ltd. v. State of Orissa (1969) is misplaced; later Supreme Court decisions in Chairman, SEBI v. Shriram Mutual Fund (2006) and Suborno Bose v. Enforcement Directorate (2020) hold that penalty is attracted as soon as contravention is established, irrespective of intention. (Paras 24-27)

(C) Penalty - Quantum - Proportionality - Adjudicating authority has discretion; Tribunal reduced penalty from Rs.4,00,00,000/- to Rs.50,00,000/- considering the nature of contraventions and conduct of appellant. (Paras 30-31)

Facts of the case:
The appellant company, incorporated in 2007, manufactured transmission parts and received foreign inward remittances. It failed to report inward remittances to RBI within 30 days, delayed filing of FC-GPR forms, did not file Annual Return on Foreign Liabilities and Assets for several years, and issued shares without RBI taking FC-GPR on record. The adjudicating authority imposed a penalty of Rs.4,00,00,000/- on the company and Rs.1,00,000/- on each director. The company appealed.

Findings of Court:
The Tribunal upheld the finding of contravention but reduced the penalty on the company to Rs.50,00,000/-, holding that the ends of justice would be met by such reduction. The appeal was partially allowed.

Issues: (i) Whether absence of loss of foreign exchange or mens rea absolves the appellant from penalty? (ii) Whether the proceedings were illegal due to deletion of Section 6(3)(b) and delay? (iii) Whether the contravention amount was wrongly quantified? (iv) Whether the quantum of penalty was disproportionate?

Ratio Decidendi: FEMA is a compliance-oriented statute; penalty does not require proof of mens rea or actual loss of foreign exchange. The contravention amount is correctly quantified based on the value of shares issued. Delay in proceedings does not invalidate them when contraventions are continuing. However, considering the technical nature and conduct, penalty may be reduced in exercise of discretion.

Result: Appeal partially allowed; impugned order modified - penalty on company reduced to Rs.50,00,000/-. No order as to costs. (Paras 31-34)

Legal Category Hierarchy

1. Contravention of FEMA reporting obligations — Delay in filing FC-GPR and FLA returns — Imposition of penalty. (Para 2 , 3 , 4 )

2. Appellant argued technical violation, no mens rea, and disproportionate penalty; Respondent argued strict liability and proportionality. (Para 6 , 8 , 11 , 14 , 18 , 19 )

3. Appeal partially allowed — Penalty reduced substantially. (Para 30 , 31 , 32 )

4. Is absence of loss of foreign exchange a defense to penalty under FEMA?

No, FEMA is compliance-oriented; Section 13 imposes penalty based on sum involved, not financial loss. (Para 23 )

5. Is mens rea required for imposing penalty under FEMA?

No, penalty is civil; intent irrelevant once contravention established. Followed Shriram Mutual Fund and Suborno Bose. (Para 24 , 25 , 26 )

6. How is the sum involved in contravention quantified for penalty under FEMA?

Based on the value of shares issued against foreign investment, not just the reporting delay. (Para 29 )

FINAL ORDER

24.09.2025

The present appeal has been filed under Section 19(1) of the Foreign Exchange Management Act, 1999 (FEMA, 1999) against the Order No. SDE/SRO/CEZO-II/15/2022 passed by the Spl. Director, Directorate of Enforcement on 26.08.2022.

Facts in Brief

2. Facts on record reveal that the appellant company, M/s Woosu Automative India Pvt. Ltd., was incorporated in 2007 and was engaged in the manufacture of transmission parts used in motor cars and supplying them to the motor car manufacturing companies in India and abroad. Information was received by the Respondent Directorate that the company had received inward remittances of INR 23,87,33,009.6 and the same had not been reported to Reserve Bank of India (RBI). Based on the information, investigations were initiated under the provisions of FEMA, 1999. During the investigation, statement of Mr. Yong Chan Jung, Director of the company was recorded. Details of foreign inward remittances were also obtained from the RBI.

3. Based on the investigations, a Complaint was filed before the adjudicating authority. The said complaint contained the following allegations:

 That in respect inward remittances amounting to INR 30,83,63,005/- received by M/s. Woosu Automotive India Pvt. Ltd., as per the details furnished by Reserve Bank of India vide email dated 15/10/2020, the receipt of foreign investment was not reported to RBI within 30 days of receipt of the remittances and thereby M/s Woosu Automotive India Pvt. Ltd. appears to have contravened the provisions Para 9(1)(A) of Schedule I to Regulation 5(1) of Foreign Exchange Management (Transfer or Issue of any security by a Person Resident Outside India) Regulations, 2000 to the extent of INR 30,83,63,005/-;

 That in respect of 62,83,172 shares and 63,88,770 shares, M/s Woosu Automotive India Pvt. Ltd. had filed Form FC-GPRS with a delay 30 days and 50 days respectively, in contravention of the provisions of Para 9(1)(B) of Schedule-I of Regulation 5(1) of Foreign Exchange Management (Transfer or Issue of any security by a Person Resident Outside India) Regulations, 2000.

 That in respect of 2,39,37,557 shares issued to foreign investor, M/s. Woosu Automotive India had filed form FC-GPRS, but RBI had not taken on record the form FC-GPRs filed and till date the said form FC- GPRs were pending and thus M/s. Woosu Automotive India Pvt. Ltd. had contravened the provisions of Para 9(1)(B) of Schedule I of Regulation 5(1) of Foreign Exchange Management (Transfer or Issue of any security by a Person Resident Outside India) Regulations, 2000 read with Section 6(3)(b) of FEMA, 1999 in respect of the 3,66,09,499 shares issued, valued at INR 36,60,94,990/-.

 That since M/s. Woosu Automotive India Pvt. Ltd. had received foreign investment during 2007 to 2009, it ought to have filed Annual Return on Foreign Liabilities and Assets from FY 2010-11 onwards. By not filing the same from FY 2010-11 to FY 2016-17, M/s. Woosu Automotive India Pvt. Ltd. appears to have contravened the provisions of Para 9(2) of Schedule I to Regulation 5(1) of Foreign Exchange Management (Transfer or Issue of any security by a Person Resident Outside India) Regulations, 2000 and by not filing the Annual Return on Foreign Liabilities and Assets, from FY 2017-18 to FY 2019-20, M/s. Woosu Automotive India Pvt. Ltd. had contravened the provisions of Regulation 13.1(3) of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017.

 That Mr. Sung Hyun Jun, former Managing Director of M/s. Woosu Automotive Ltd. being responsible for conduct of business of the company during the relevant period was guilty of the contravention committed by the company in terms of section 42(1) of FEMA, 1999.

 That Mr. Hwang Yun Choel, Sh. Hong Soo Kim, Sh. Ko Yeong Keun, Sh. Jung Yongho & Sh. Shin Myoyoungho, Sh. Lee Sungkwan & Sh. Junga Choi, former directors of M/s Woosu Automative India Pvt. Ltd. & Sh. Heon Hwi Ha & Sh. Yong Chang Jung, t

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2025 Supreme(Online)(ATFP) 13381

APPELLATE TRIBUNAL FOR FORFEITED PROPERTY
Munishwar Nath Bhandari, Chairman, V. Anandarajan, Member
M/s Woosu Automotive India Pvt. Ltd. – Appellant
Versus
The Enforcement Directorate Chennai – Respondent
FPA-FE-73/CHN/2022

Under FEMA, 1999, penalty for contravention of reporting obligations does not require proof of mens rea or actual loss of foreign exchange; liability arises upon breach of statutory compliance.

Legal Category Hierarchy

Table of Contents

4. Is absence of loss of foreign exchange a defense to penalty under FEMA?

5. Is mens rea required for imposing penalty under FEMA?

6. How is the sum involved in contravention quantified for penalty under FEMA?

2025 Supreme(Online)(ATFP) 13381

APPELLATE TRIBUNAL FOR FORFEITED PROPERTYMunishwar Nath Bhandari, Chairman, V. Anandarajan, MemberM/s Woosu Automotive India Pvt. Ltd. – AppellantVersusThe Enforcement Directorate Chennai – RespondentFPA-FE-73/CHN/2022

Under FEMA, 1999, penalty for contravention of reporting obligations does not require proof of mens rea or actual loss of foreign exchange; liability arises upon breach of statutory compliance.

Legal Category Hierarchy

Table of Contents

4. Is absence of loss of foreign exchange a defense to penalty under FEMA?

5. Is mens rea required for imposing penalty under FEMA?

6. How is the sum involved in contravention quantified for penalty under FEMA?

Cases Referred (2)

APPELLATE TRIBUNAL FOR FORFEITED PROPERTY
Munishwar Nath Bhandari, Chairman, V. Anandarajan, Member
M/s Woosu Automotive India Pvt. Ltd. – Appellant
Versus
The Enforcement Directorate Chennai – Respondent
FPA-FE-73/CHN/2022