IN THE HIGH COURT OF JUDICATURE AT CALCUTTA CIVIL APPELLATE JURISDICTION APPELLATE SIDE RESERVED ON: 08.07.2025 DELIVERED ON: 01.08.2025 PRESENT:

THE HON’BLE MR. JUSTICE TAPABRATA CHAKRABORTY AND THE HON’BLE MR. JUSTICE REETOBROTO KUMAR MITRA MAT 524 OF 2025 WITH IA NO. CAN 1 OF 2025 SANJAY JHUNJHUNWALA - VERSUS –

RESERVE BANK OF INDIA & ORS.

Appearance:

Mr. P. Chidambaram, Sr. Advocate, Mr. T. Shatnagen, Adv.

Mr. Aditya Kanodia, Adv.

Mrs. Shreya Trivedi, Adv. .... For the Applicant/Petitioner Mr. Jaideep Gupta, Sr. Advocate, Ms. Suchishmita Ghosh, Adv. … For the respondent nos. 1 and 2 Mr. Arijit Chakraborti, Adv. Mr. Debsoumya Basak, Adv.

Ms. Swati Kumari Singh, Adv. … For the respondent nos. 3 and 4 Reetobroto Kumar Mitra, J.:

1. The present appeal challenges an order passed by a learned Single Judge on 1st April, 2025, dismissing the Writ Petition filed by the appellant herein. The primary prayer in the Writ Petition was that the writ petitioner be permitted to renew the compounding application made by him, thereby quashing the rejection of the compounding application on 11th September, 2024.

2. The facts in a nutshell are:-

a. The petitioner utilised the liberalised remittance scheme between February 2011 and 8th February 2013 to remit USD5,99,999 equivalent to (at prevailing exchange rate at the time) Rs. 2.97 crores to the LGT Bank of Singapore.

b. The purpose of such remittance was to invest in international bonds, securities and mutual funds through a foreign currency denominated portfolio investment account.

c. The amount invested by the petitioner was used to earn profit for the LGT Bank from its own portfolio bank.

d. The bank would give short term advances for optimising gains against the pledge of investment held in the appellant’s portfolio account.

e. Such investment resulted in large gains for the petitioner.

f. The petitioner, some time in 2015, closed the account with a profit of approximately USD 66,773 equivalent to Rs. 1.24 crores.

g. The petitioner had offered such gains for tax purposes and had paid the tax in 2015 itself.

h. The trouble erupted some time in 2020 when the Enforcement Directorate initiated proceedings on 17th April 2020 by way of complaint of contravention of provisions of the Foreign Exchange Management Act, 1999 (hereinafter referred to as the Act).

i. Pursuant to the complaint, a show cause notice dated 20th April, 2020 was issued under Section 16 read with Rule 4 of Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 for contravention of provisions of Sections 3(a), 3(b) and 4 of the Act read with Regulation 3 of the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations 2000, as to why an inquiry should not be initiated against the appellant.

j. The appellant had given a reply to such show cause notice. In respect of the above, the authorities proceeded to conduct an inquiry. Even as the proceedings were pending, the appellant filed a compounding application on 20th January, 2023.

k. The said application was returned by the authority vide an email dated 8th January, 2024 (Page 138) on the ground that there was lack of clarity and granted liberty to the appellant to approach the concerned authority (External Commercial Borrowing Division-ECDB) with a fresh application.

l. The Adjudicating Authority by its order dated 28th March, 2024 passed an order, holding the appellant guilty of borrowing without the permission of the RBI in the form of short term advances and thereby in contravention of Regulation 3 of the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations 2000. The adjudicating authority imposed a penalty of Rupees 10 Crore on the appellant herein, under Section 13(1) of the Act read with the Adjudication Rules.

m. This order was not appealed by the appellant; on the contrary, a second compounding application was made, admitting in no uncertain terms, the contravention of borrowing without RBI’s permissions and vio