A statutory penalty may be reduced by the court if the maximum penalty imposed is deemed disproportionate to the financial capacity of the entity, provided the underlying violations are not contested.

FINAL ORDER

By this appeal, a challenge has been made to the order dated 09.11.2022 passed by the Directorate FIU imposing a penalty of Rs. 1 lakh, finding failure of the appellant to put in place an effective internal mechanism to deduct and report suspicious transactions reportable as STRs, in violation of Section 12 of the PMLA Act, 2002 read with Rule 7(3) of the PMLA Rules, 2005 .

Another penalty of rupees one lakh has been imposed for violation of Sections 12 (1)(a) and (b) of the Act of 2002 read with Rules 2(1)(cd) 5(2) and 7(3) of the Rules of 2005. The third penalty of rupees one lakh was imposed for failure of the appellant to identify the ultimate beneficial owner of the trust, legal entities, and similar other customers in violation of Section 12 (1) (c) of the PMLA Act, 2002 read with Rule 9(1) (a) (i) of PMLA Rules, 2005 and Section 12 (1) (d) of the 2002 read with Rules 9 (1) (a) (ii) and 9 (3) of the PMLA Rules, 2005 .

The learned counsel for the appellant initially made a challenge to the findings regarding the violation of different provisions of the Act of 2002 and the Rules of 2005. However, he restricted his arguments to the quantum of penalty imposed, with a request to make it proportionate to the allegation.

The counsel submits that the maximum penalty for each violation has been levied, ignoring that the appellant is a small cooperative society bank, and therefore payment of the penalty amount would cause a heavy burden and would be at the cost of the members and investors. The prayer was made to dispose of the appeal with acceptance of the prayer.

The appeal was opposed by the counsel for the respondent. It was submitted that the penalty imposed by the Director FIU is proportionate to the violations, and therefore interference may not be made.

We have considered the rival submissions and find that so far as the findings recorded by the Director FIU regarding contravention of various provisions are concerned, the challenge to the same has not been pressed by the counsel for the appellant. However, it is requested that the penalty amount may be made reasonable, looking to the financial condition of the society.

We have considered the rival submissions and find that a penalty of rupees one lakh has been imposed for each violation, which as per the provisions of the Act is the maximum penalty. However, taking overall facts into consideration, we reduce the penalty by 50%, thereby making the total penalty to rupees one lakh fifty thousand instead of three lakhs.

Accordingly, the amount of rupees one lakh imposed for each violation is substituted by rupees fifty thousand, making a total of rupees one lakh fifty thousand, which shall be deposited by the appellant within two months.

The appeal is disposed of accordingly.