FINAL ORDER

25.03.2026

This Order disposes of the Appeals Nos. FPA-FE-102/CHN/2019 filed by M/s Keshav Castings Private Ltd. (KCPL) and FPA- FE-103/CHN/2019 filed by Shri Sanjay Kumar Agarwal, against the Order No. ADE/SRO/HYZO/09/2019 dated 24.09.2019 (Impugned Order), passed by the Additional Director, Enforcement Directorate, Government of India, Chennai. The Ld. Adjudicating Authority (AA) imposed the penalty of Rs. 10,00,000/- on M/s Keshav Castings Private Ltd. for the contraventions of Section 6 (3) (b) of the Foreign Exchange Management Act, 1999 (FEMA) read with Regulation 5 (1) (i) of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulation 2000, in terms of Paragraph 9 (1) (A) of Schedule 1 to the said Regulation to the extent of Rs. 7,21,00,000/-. Further penalty of Rs. 1,00,000/- was imposed on Shri Sanjay Kumar Agarwal, Managing Director of Company for the contravention of aforementioned provisions in terms of Section 42 of FEMA. Penalties of Rs. 2,00,00,000/- and Rs. 1,00,00,000/- were imposed on M/s Keshav Castings Private Ltd. for the contraventions of Section 6 (3) (b) of the FEMA read with Regulation 5 (1) (i) of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulation 2000, in terms of Paragraph 8 of Schedule I to the said Regulations to the extent of Rs. 4,69,00,000/- and Rs. 2,52,00,000/- respectively. The contravention in terms of Paragraph 8 of Schedule I to the said Regulations to the extent of Rs. 4,69,00,000/- occurred for not issuing the shares and by retaining the said amount without the permission of the Reserve Bank of India (RBI) beyond the expiry of the period of 180 days from the date of its receipt. The contravention in terms of Paragraph 8 of Schedule I to the said Regulations to the extent of Rs. 2,52,00,000/- occurred for refunding the amount to the individual Appellant, without the permission of RBI after the expiry of 180 days from the date of receipt. Penalty of Rs. 20,00,000/- and Rs. 10,00,000/- were imposed on Shri Sanjay Kumar Agarwal for the aforementioned contraventions in terms of Section 42 of FEMA. The Appellants have complied with the Order dated 19.03.2025 of this Tribunal to make pre-deposit of 20% of the penalty amounts by way of FDRs in the name of the Respondent Directorate.

2. Ld. Counsel for the Appellant submitted that the Impugned Order is in violation of the principles of natural justice since their prayer to cross examine the Manager and the Managing Director was declined. Ld. Counsel contended that an amount of Rs. 4,86,00,000/- was remitted and only Rs. 2,35,00,000/- was retained. The amounts were remitted as shares could not be allotted due to near closure of the Company because of lack of business. The Appellants were under the bona fide belief that there was no requirement to submit the details of transactions between the Director of Company and the Company unless the investment cap is exceeded beyond the amount stipulated. Ld. Counsel pressed that the Show Cause Notice (SCN) did not allege any misuse of the funds received from the person resident outside India. The SCN also did not allege any intentional act on their part. He cited the Judgment of the Hon’ble Supreme Court in the case of Hindustan Steel vs. State of Odisha, to plead that no penalty could be imposed.

3. Ld. Counsel for the Appellant further argued that the contravention by them was only of non-reporting. He stated that in such cases maximum penalty could not be of amount more than Rs. 2,00,000/-. Ld. Counsel pleaded that in view of Sub-Section 3 of Section 36 of FEMA the provisions of the Income Tax Act, 1961 are applicable and hence passing of the Impugned Order after four years could not be allowed. Ld. Counsel contended that the Complaint under FEMA itself specified that the amount was received on non-repatriation basis. Ld. Counsel also pleaded that no penalty was imposable on Shri Sanjay K