Delhi High Court
Union Of India (Uoi) vs Abn Amro Bank And Ors. on 21 September, 2005
Equivalent citations: [2007]138COMPCAS582(DELHI), 124(2005)DLT137, 2005(84)DRJ593, [2008]81SCL443(DELHI)
Author: R.C. Chopra
Bench: R.C. Chopra
JUDGMENT R.C. Chopra, J.
Page 1294
1. The Enforcement Directorate through Union of India has filed this appeal under Section 54 of the Foreign Exchange Regulation Act, 1973 read with Page 1295 Section 35 of the Foreign Exchange Management Act, 1999 against an order dated 10.3.2003 passed by the Appellate Tribunal by which the order of the adjudicating authority was set aside.
2. The facts relevant for the disposal of this appeal, briefly stated, are that according to prosecution, respondent No. 4, a foreign company through respondent No. 3, and one Cliff Roy established respondent No. 2 M/s. Maple Leaf International in India. According to the appellant though this company was established and incorporated through Indian nationals but it was actually a company established and incorporated on behalf of the foreign company, respondent No. 4 for trading in imported gold in India. According to the appellant such a company could be established only with prior permission of Reserve Bank of India under Section 29(1)(a) of Foreign Regulation Act, 1973 (hereinafter referred to as 'FERA' only) but it was established without any permission. It is alleged that the respondents adopted automatic approval route and established this company by filing form FC (RBI) representing that this company was covered by Annexure III list whereas it was being established for trading only and the automatic approval route was not available to it in terms of Notification No. 180/98 ( RBI) dated 13.1.1998 issued by RBI.
3. According to appellant in Form FC (RBI) dated 21.5.1998 the respondent No. 2, Maple Leaf Trading International, the newly incorporated Company did not declare that it was a trading company and would mainly make exports. It was also alleged that the company had ensured 100% equity in the hands of the foreigners as 51 per cent of its shares were issued to respondent No. 4 a foreign company on 20.5.1998 and 49 per cent shares were issued to Indian share holders which were kept firstly with Sh. V.S. Jaffa and thereafter with Shri A.R. Khan under an agreement, providing that the said shares would ultimately go to respondent No. 4. It is also alleged that the company did not disclose that its business in India was trading in imported gold coins, the sale of which was started even and a large number of contracts were entered with general public. Various documents and statements of the witnesses were placed on record to show that Mr. Cliff Roy was making inquiries on behalf of respondent No. 4 in regard to the import and trading of gold in India. M/s J.C. Bhalla and Company, Chartered Accountants from whom inquiries were being made, were told that the object of the Company was sale of Maple Leaf gold coins in India.
4. According to the appellant, M/s J.C. Bhalla and company wrote a letter dated 18.1.1998 to Mr. Cliff Roy informing him that if a non resident Indian wanted to make investments in India for trading he had to make an application to the Ministry of Industry and their best bet would be to make an application as per original approval route and wait for the new policies. Mr. Cliff Roy on 14.1.1998 wrote a letter to M/s J.C. Bhalla and Company that they were going to establish a company with local Directors arranged by Messrs Abacus Legal Group. On 18th January, 1998 he again wrote to M/s J.C. Bhalla and Co. that Messrs Abacus Legal Group had already been allotted a name by the Registrar of Companies and suggested that a company be set up and established with Indian Directors/shareholders. The letter dated 4.2.1998 from Mr.Cliff Roy to respondent No. 3 Lambert Page 1296 Kroger stated that the new policy of the government allows foreign companies to come under automatic approval route without prior permission as long as primary aim was exports and general trading and as such, respondent No. 4 would own 51% share and an Indian citizen would own 49 per cent shares. It was stated that once the company was established, an application would be submitted to Foreign Investment Promotion Board for permission to respondent No. 4 to buy remaining 49 per cent shares also from the Indian shareholders and within first few months of operations they must have some exports also to keep inside the regulations for an automatic approval route company.
5. It is alleged that the company, respondent No. 2, was thus established under automatic approval route without disclosing that its main object was trading in gold coins. A misleading statement was made in form FC (RBI) that the activities of the company were covered by the 'NIC code 893 ' - which related to 'Business Management Consultancy for trading, marketing and selling of goods and services ' -. Under column VIII (3) it was declared that the company was a trading company primarily engaged in exports. According to the appellant the respondent No. 2 never intended to undertake any activity relating to consultancy and their only aim was to trade in maple gold coins in India which they started in violation of notification No. 180/1998 and as such, violated the Provisions of Section 29(1)(b) and Section 19(1)(a) of the FERA, 1973. According to the appellant not only that the respondents No. 2 to 4 established a foreign company without permission of RBI, allotted the shares of the company to a foreign company i.e. Respondent No. 4 without permission of RBI in violation of Section 19(1)(a) and 29(1)(a) read with Section 68(1) and Section 30(1) of the Act, they also violated the RBI guidelines by opening Bank accounts with respondent No. 1, ABN Amro Bank, which also violated Section 6(4) and 6(5) of the Act for trading in gold coin vis-a-vis respondent No. 2 without permission of the RBI. According to the appellant notifications No. 180/98 and 188/98 issued by the RBI were not applicable to the activities of respondent No. 2 as it was neither a consultancy firm nor had come to India for exporting gold. It had come only to import gold and then sell the same in Indian market.
6. The adjudicating authority found the respondents guilty and as such imposed various penalties. The respondents went in appeal before the Appellate Tribunal which set aside the orders of the adjudicating authority holding that respondents No. 2 to 4 were covered by the Notifications No. 180 and 188 and as such did not violate any of the provisions of the Act. The Tribunal held that the respondents never intended to carry out any illegal activity in India and as such were making inquiries from its CA and Advocates in Delhi. After getting legal advice only that the automatic approval route was available, the respondent No. 2 was incorporated in India by Indian nationals and thereafter 51 per cent share holding was transferred to respondent No. 4. It was held that the respondents never had any dishonest or malafide designs. It was a Company established by Indians only and as such there was no violation of Section 29(1)(a), 19(1)(d), 29(1)(a), 47(1) and 49 read with Section 68(1) of the Act. It was also held that the act of respondents in opening a Bank Account with repatriation facilities was also Page 1297 not in violation of Section 30(1) of the Act in view of the amendment of the Act in 1993. It was held that the respondents were made to believe that their actions were lawful and within the laws of the country. Regarding registration of respondent No. 2 with RBI it was held that if the appellant had any doubt about the validity of information on which the RBI had allowed the registration of the company, the appellant ought to have brought the same to the notice of RBI which could have reviewed the matter and taken a decision or could have revoked the registration after giving an opportunity to the respondent company to show cause as to why its registration should not be revoked. It was also held that there was no violation of any condition subject to which registration was accorded by RBI for foreign equity participation up to 51 per cent and no further permission was required for transfer of the equity or its holding by foreign nationals. It was held that the company having being incorporated as per Notification No. 180/98 was covered by the automatic approval route and had complied with the conditions mentioned in para 3 of the Notification. It was also held that the respondent No. 4 was a foreign company, and its functionaries who were foreign nationals had acted in good faith and bonafide belief on legal advice tendered to them by the experts in India and had not violated any provision intentionally. It was also held that if at all the company had contravened any of the provisions of the Act it had acted in good faith only and their activities were lawful. It was held that the respondents had no intention to commit breach of laws. Regarding respondent No. 1 ABN Bank also it was held that there was no bar under the Act or RBI guidelines for opening of an account of any company and so far as the import of gold was concerned the Bank was importing gold on its own behalf. It was held that the sale of the gold by respondent No. 1 to respondent No. 2 was against Indian currency and as such provisions of Section 6 of the Act were not attracted.
7. Learned counsel for the respondents have vehemently argued that this appeal under Section 54 of the FERA, 1973 could be only on a question of law and since the appellant is assailing only factual findings given by the Tribunal there is no question of law to be decided by this Court and as such the appeal is not maintainable even. It is submitted that the respondents No. 2 to 4 were within the notification 180 and 188/98. As per sub clause (viii) of Clause (3) Form F.C.(RBI) is required to be filled up only by Annexure III Companies or industries. In form FC(RBI), they had given only those details which were required under Annexure III regarding their consultancy activities. Trading activities were not declared as it was not an Annexure III activity. It is contended that the respondents No. 2 to 4 had not indulged in any illegal activity and had not committed breach of provisions of FERA as respondent No. 2 was a company incorporated in India by Indian nationals.
8. It is submitted that prior to the amendment of the Act in 1993 Section 29(1)(a) of the Act could be applied to respondent No. 2 since it was a company incorporated in India in which non residents interest was 51 per cent. However after the amendment of the Act w.e.f. 8.1.1993 the words 'or in which the non residents interest is more than 40 per cent' - were deleted and as such no act of respondents No. 2 to 4 was in violation of the Act. It is submitted that Page 1298 Notification No. 180 and 188 had simplified the procedure for approval of foreign investments in order to attract foreign exchange and since the remittances in the present case had resulted in foreign exchange in-flow into India and none of the respondents had remitted any amount out of India no provision of the Act was violated. It is also submitted that the incorporation of company by Indian nationals at the instance of and on behalf of a foreign company was not illegal as Notification No. 180/98 permitted a newly set up trading company primarily engaged in exports to issue 51 per cent of its equity to a foreign company provided the company was registered as export house before remittance of dividend to foreign investors. It is submitted that the registration as an export house is required before remittance of dividend only to the foreign investors and since respondent No. 2 had never remitted any dividend to foreign investor i.e. Respondent No. 4, there was no violation of the notification No. 180/98.
9. It is pointed out that till January, 1998 prior clearance from RBI was required for issue of shares of such company to foreign investors but thereafter, only requirement was that Company should make a report within 30 days of the issuance of the shares. It is submitted that a newly set up company can not have already on going exports and it can start exports only after its establishment and as such mere issuance of equity cannot be violation of FERA. The object of notification No. 180 was to encourage exports and attract foreign exchange in country. It is stated that in July, 1999 when respondent No. 2 was shut down it was in the process of increasing its exports and had already exported goods worth about Rs.43 lakhs. It was also having firm export orders of the value of Rs.8.21 crores and further orders in regard to leather goods etc. were in the pipeline. Learned counsel for respondents No. 2 to 4 submits that even if the respondent No. 2 had not exported anything after its incorporation it could not be held liable for violation of any provision of FERA since it had never remitted any dividend to foreign investors.
10. It is also argued that the respondents had not made any mis- statement for the reason that form FC(RBI) was not applicable to companies which were engaged in trading activities. Respondent No. 2 was providing business consultancy services also and that is why this form was filled up and declaration was made in regard to the business management consultancy services. Therefore there was no mis-statement or wrong declaration in FC(RBI) by respondent No. 2 and as such Sections 19 and 21(1)(b) Section 27, 49 and Section 68 of FERA were not attracted. Referring to certain columns in form FC(RBI) it is submitted that this form was old and out dated as it was first introduced in 1997 but was still being used unchanged although the rules and regulations had undergone substantial change. It is shown that this form continued to mention about the application for foreign technology transfer although a separate application form had already been introduced for foreign technology transfer. Similarly for Item No. VII (a) also, after the notification No. 180/98, no prior permission was required for issuance of shares. It is submitted that this form had become redundant in regard to trading companies primarily engaged in exports also and as such for its trading activities the respondent No. 2 was neither required to fill up this Page 1299 form nor there was any mis statement or omission therein. In regard to contention of learned counsel for the appellant that the respondent No. 2 was never engaged in any management consultancy activities, it is submitted that business consultancy activities were actually undertaken. Moreover form FC(RBI) merely incorporated a proposal to engage in the activities and even if the company was unable to undertake those activities for any reason it could not be held to have violated FERA provisions.
11. It is also submitted that no remittances were ever made by respondent No. 3 and as such, it had not violated Section 30(1) of the Act by merely opening a Bank Account with respondent No. 1. It is argued that after the amendment of 1993 the respondents No. 3 and others who were employees of respondent No. 2 were entitled to open a bank account with repatriation facilities as they were entitled to remit up to 75 per cent of their salaries for their family maintenance.
12. I have heard Shri P.P.Malhotra, Sr.Advocate, learned ASG for the appellant, Shri Amit Sibal, Advocate for respondents 2 to 4 and Shri J.S.Arora, learned counsel for respondent No. 1.
13. It is true that under Section 54 of the Foreign Exchange Regulation Act, 1973, an appeal against an order of the Appellate Board lies only on a question of law but learned ASG has argued that the impugned order passed by the learned Appellate Tribunal is contrary to law inasmuch as Section 59 of the FERA was completely ignored. It is submitted that the learned Appellate Tribunal without adverting to Section 59 of FERA, which enjoins upon the Courts to presume the existence of a culpable mental state on the part of the accused for the commission of an offence under the Act, the Tribunal proceeded to set aside the orders passed by the Adjudicating Authority on the ground that the respondents No. 2 to 4 had no culpable intention. He draws the attention of this Court to observations made by the Appellate Tribunal in paras 12, 13, 15, 16, 26 and 28 of the impugned order. According to him this erroneous approach of Appellate Tribunal raises a question of law and calls upon this Court to decide as to whether the Appellate Tribunal had remained within the limits of law and correctly applied the law for passing the impugned order. On the other hand, learned counsel for the respondents have argued that the findings returned by the Appellate Tribunal were purely factual, based on facts and circumstances of the case and as such neither any infirmity is attached to the impugned order nor any question of law arises for consideration of this Court.
14. After considering the submissions made by learned counsel for the parties, this Court is of the view that although Section 59 of FERA makes it incumbent for the Courts to presume the existence of a culpable mental state on the part of an accused in prosecution for an offence under the Act for which, a culpable mental state is required, but it also says that it shall be a defense for the accused to prove that he had no such mental state. Sub-clause (2) of Section 59 clarifies that for the purpose of this Section, a fact is said to be proved only when the Court believes it to exist beyond reasonable doubt and not merely when its existence is established by preponderance of probability. Sub-clause (3) further adds that the provisions Page 1300 of this Section shall, so far as may be, applied in relation to any proceedings before an adjudicating authority also as they apply in relation to any prosecution for an offence under the Act. A conjoint reading of aforesaid clauses of Section 59 of FERA makes it abundantly clear that although the Courts are under an obligation to presume the existence of a culpable mental state in prosecution or proceedings in relation to any offence under the Act, the presumption is rebuttable and an accused can rebut this presumption by proving that he had no such culpable mental state. However, a heavy burden is cast upon an accused/respondent for rebutting the presumption. The law is well settled that an accused is not to prove his defense only by defense evidence. He may prove his defense through the facts and circumstances brought on record by the prosecution even and rebut the presumption. Appellate Tribunal, therefore, could examine the facts and circumstances of the case to find out as to whether the respondents had succeeded or not in proving on record that they had no culpable mental state to commit offences under Section 19, 29, 49 and 47 of FERA, 1973 as alleged by the appellant. Learned Appellate Tribunal did not chose proper words while considering this question but it is found that on the basis of facts and circumstances brought on record only the learned Appellate Tribunal was trying to find out as to whether the respondents had rebutted or not the presumption against them under Section 59 of the Act. In view of the discussions made by learned Appellate Tribunal in regard to culpable mental state of the respondents and findings arrived in respect thereof, no question of law has been raised in this appeal as the findings given by the Tribunal were findings of facts only based on material on record. No finding was arrived at upon misinterpretation of law nor any issue was perversely decided. On this ground itself, this appeal is liable to be dismissed as it raises no question of law.
15. The adjudicating authority vide its order dated 22.9.2000 had held that the respondents No. 2 was established in India without permission of RBI, shares of the company were allotted to respondent No. 4, a foreign company, respondent No. 3 opened Bank Account in violation of RBI guidelines and remitted money to his own country and respondent No. 2 imported gold through the Bank, respondent No. l, without permission of RBI. According to learned ASG, the respondents No. 2 to 4 had violated Section 29(1)(a), Section 19(1)(d) and Section 29(1)(6) read with Section 49 and Section 8 of the FERA. They also violated Section 30(1) and Sections 6(4) and 6(5) of the Act. He draws the attention of this Court to the statements of Shri Anil Bhalla, Shri Vikrant Singh Jaffa and Shri A.R.Khan, witnesses for the prosecution and the fax messages dated 4.8.1997, 28.10.1997, 1.1.1998, 12.1.1998, 14.1.1998, 18.1.1998, 22.1.1998 and 4.2.1998, to show that since August, 1997, the respondent No. 4, a foreign company and its representatives were contemplating to establish a trading company in India for the sale of gold coins and in pursuance of this design only, they established the Indian company M/s.Maple Leaf Trading International, respondent No. 2, of which respondent No. 3 was the Managing Director. According to him, the Indian promoters/share holders were dummy promoters/directors, who were holding shares on behalf of the foreign company, respondent No. 4 only, and the transfer of shares to Mr.A.R.Khan Page 1301 was also under a share transfer agreement dated 16.4.1999 only with a view to ensure that ultimately, 100% share holding of respondent No. 2 goes to respondent No. 4.
16. It is argued that the application dated 21.5.1998 made by respondent No. 2 under notification of 180 of 1998 contained misleading information inasmuch as it was made under NIC Code 893 falsely representing that the company was engaged in business management consultancy. It is submitted that in Column No. 3 of this application, it was specifically mentioned that it was not a trading company. It was signed by a representative of respondent No. 4, Mr.Cliff Roy as the Managing Director of respondent No. 2. It is submitted that the respondent No. 2 deliberately adopted the automatic approval route as it could not get RBI permission for trading in gold in India and it had no intention to engage in exports. The letter dated 8.6.1999 written by RBI is relied upon to show that RBI granted a registration number to respondent No. 2 for foreign collaboration in terms of the notification No. 180 dated 13.1.1998 on account of the fact that its activities were described under the National Industrial Classification (NIC) Code No. 893 for business and management consultancy activities as per Annexure-III.
17. Learned ASG submits that not only a foreign company managed to establish its 100% subsidiary, respondent No. 2, in India for a purpose which was not permissible under the automatic approval route, out of 20,000 shares, only 20 shares were registered in the names of Shri Anil Bhalla and Shri Rajesh Sethi and 9,780 shares of the value of Rs.100/- each, were given to Mr.Jaffa on payment of Re.1 per share only. On 19.5.1998, the shares of Anil Bhalla and Rajesh Sethi were purchased by Mr.Cliff Roy, Managing Director of respondent No. 2 and a representative of respondent No. 4 and remaining 9,780 shares were kept with one A.R.Khan, an Indian national under an agreement which provided that these shares were to be passed on to respondent No. 3 and Mr.Cliff Roy, who were not residents of India. 10,200 shares were sold to respondent No. 4, a company established in Switzerland. According to him, this company was established by foreign nationals in a clandestine manner and in violation of the provisions of FERA. Form FNC 2 or FNC 3, which are prescribed for trading activities were never filled up by respondents No. 2 to 4 and their proposed trading in gold coins was not in any of the categories provided for automatic approval route. It is also argued that notification No. 180 dated 13.1.1998 or 188/98 do not protect the respondents as the respondent No. 2 was not a company primarily engaged in exports. These notifications allowed trading in India but only with the object of encouraging foreign companies to make exports from India. The opening of the bank accounts by respondent No. 3 and others and remittance made to their countries was also in violation of the provisions of FERA. It is, therefore, submitted that the impugned orders passed by the learned Appellate Tribunal are liable to be set aside and the orders passed by the adjudicating authority are to be restored.
18. Learned counsel for respondents No. 2 to 4 has, however, argued that the learned Appellate Tribunal has returned findings of fact that the respondents No. 2 to 4 never intended to violate Indian laws and had taken all precautions as well as legal advice before establishing respondent No. 2 in India and as Page 1302 such, the impugned orders were fully warranted and justified. According to him, the respondent No. 2 was incorporated in India by Indian nationals in terms of the Amending Act of 1993 and the notification dated 13.1.1998 which had made it clear that 100% foreign investment was permissible. The company made no concealment that its 51% equity was from a foreign investor, i.e., Respondent No. 4 and it had applied to FIPB approval also because it intended 100% control of the company. According to learned counsel for respondents No. 2 to 4, the respondent No. 2 was established in India not only for trading but for exports also, which had started and were likely to pick up in due course. It had started giving business consultancy also to Indian nationals, who wanted to get involved in business of gold coins. According to him, the notification No. 180 of 13.1.1998 permitted the setting up of a trading company if it was primarily for exports. According to him, there was nothing wrong in allotting 51% shares to respondent No. 4 and waiting for FIPB permission for 100% control of respondent No. 2. The respondents had no intention to transfer 49% share holding to respondent No. 4 without the permission of FIPB for which an application was also moved on 24.8.1998 and was pending. According to him, no misleading statement was made in form FC(RBI), no funds were transferred by the respondents to a foreign company and FNC 2 or 3 were not required to be filled up as the respondent No. 2 was not a foreign company. He refers to the press note dated 20.8.1991 and 31.12.1991 and the notification No. 180 of 1998 and RBI circulars dated 7.4.1997 and 20.1.1998 to argue that till some dividend is remitted to a foreign investor, no violation of FERA is made out. According to him, the dividend could be sent to foreign investor if the company was registered as an export house for which also, some time was required to develop exports, get registration as an export house and earn profits for remittance thereof to foreign investors. He also submits that the letter dated 28.10.1997 written by Cliff Roy to Anil Bhalla speaks of exports from India. The letters dated 9.1.1998, 13.1.1998, 15.1.1998 and the project report attached with FIPB form also mentioned that respondent No. 2 was proposing to undertake exports from India. He submits that if the respondent No. 2 had no intention to undertake exports, this correspondence could not have been there and even Anil Bhalla, on whose statement dated 12.7.1999 the appellant relies, says that exports were contemplated and even Code number for exports was obtained. Section 47(1) of the Act was not attracted as a trading company was incorporated, which had definite plans to undertake exports but if exports were not possible for some reason the Company could not be hauled up alleging that it had no plans for exports.
19. He points out that the respondent No. 2 instead of having a marketing network, started training people on payment of fee, to enable them to sell gold coins and make profits and as such, it was not falsely stated by respondent No. 2 in form FC(RBI) that it proposed to provide business management consultancy under NIC Code 893. Column No. 4 was not ticked in this form as trading or export activities were not part of Annexure III activities and this form was for disclosing existing activities only. It is pointed out that form FC(RBI) was an out-dated and old form various columns of which had already become redundant in view of the amendment of the Act in Page 1303 1993 and subsequent notifications and circulars issued by RBI. It is also argued that Section 30 of the Act also is not attracted against the respondents inasmuch as under the new Act, the word employment had been deleted to permit the foreign nationals to take employment in India and under regulation 11 (d) of the Exchange Control Manual, remit up to 75% emoluments to their families. However, there are no allegations against respondent No. 3 or others that any amount was remitted by them out of India.
20. Regarding respondent No. 1, ABN Amro Bank, the case of the appellant is that it has violated Section 6(4) and Section 6(5) of FERA as well as para 11 (d)(3) of the Exchange Control Manual by importing gold on behalf of respondent No. 3 and allowing Cliff Roy, Pal Claire Singh, respondent No. 3 Lambert Kroger to open QA-22 accounts which permitted repatriation of foreign exchange. It is submitted that actual repatriation is not required and even if intention of repatriation is there, the offence stands committed. Learned counsel for respondent No. 1, however, contends that it had permission to import gold and sell it. The sale of gold was not through foreign exchange and it is not alleged that respondent No. 2 violated any provision of FERA in purchasing gold from respondent No. 1. It is submitted that the price of gold supplied by respondent No. 1 to respondent No. 2 was paid in Indian currency and no foreign exchange was sent out of India through respondent No. 1. No foreign currency was ever deposited with respondent No. 1 and respondent No. 1 was importing gold not on behalf of respondent No. 2 but on its own behalf for which it had RBI permission.
21. A perusal of the material on record and the impugned orders passed by learned Appellate Tribunal clearly reveals that respondent No. 2 was incorporated in India. Even if it was established as the instance of Foreign company respondent No. 4 there was no violation of FERA as the amending Act of 1993 had lifted restrictions on Foreigners to establish such a company. The notification No. 180 of 1998 permitted foreign investments up to 51% in a Trading Company primarily engaged in exports. Such a Trading Company was not required to fill up Form FC(RBI) in terms of sub-Clause (viii) of Clause (3) of notification unless it was engaged in any of the activities mentioned in Annexure III. The respondent No. 2 had never tried to conceal that its 51% equity was with a Foreign Company respondent No. 4. It applied to FIPB also for transfer of remaining equity to respondent No. 4. It is apparent on record that respondent No. 4 wanted to establish its 100% subsidiary in India and was only waiting for FIPB permission for transfer of 49% remaining equity to it. In FIPB form also, it was stated that Foreign equity was proposed to be 100% and it was also clarified that besides Business Management and Consultancy which was the existing activity of company, it was proposing to do trading in gold and other precious metals as well as exports. Therefore, the incorporation/ registration of respondent No. 2 in India by Indian nationals at the instance of respondent No. 4, which had 51% equity therein was not in violation of any of the provisions of FERA. The agreement in regard to the transfer of 49% shares handed over to Mr.A.R.Khan of Meerut was also not in violation of any provisions of FERA as the respondent No. 4 was trying to preserve its share holding till it gets permission from FIPB for its transfer. Application for Page 1304 FIPB approval was filed on 24.8.1998 and is stated to be still pending. If respondent No. 2 had any criminal intention or malafides, it could not have opted for such an open route to establish a company in India. It is also worth mentioning that in share transfer agreement even with Mr.Khan, it was specifically stated that these shares were to be transferred after FIPB approval as Mr.V.S.Jaffa had an understanding with respondent No. 4 that these shares would be transferred after necessary approvals.
22. It is also shown on record that notification No. 180 of 1998 allowed a company incorporated in India to have foreign equity if it was to indulge in trading but its primary aim was to do exports. The correspondence between the representatives of respondent No. 2 with their Chartered Accountants and Advocates shows that the company wanted to engage itself not only in trading but in exports also. Even Anil Bhalla, who was a prosecution witness, in his statement dated 12.7.1999, stated that exports were aimed at. A project report giving the export projections is Annexure-1. The letter written by Cliff Roy to Anil Bhalla on 28.10.1997 also spoke of exports from India. The project report was attached with FIPB form also to make the intentions of respondent No. 2 clear that it wanted to do exports from India. Actual exports might or might not have taken place but there remains no doubt that the respondent No. 2 was established in India not only for the purpose of trading but for the purpose of exports also and as such it was fully covered by notification No. 180/98. These findings of fact given by Appellate Authority were, therefore, fully justified and warranted and as such, cannot be interfered with by this Court.
23. In form FC(RBI) in which the respondent No. 2 had ticked NIC Code 893 to say that the company was engaged in Business Management Consultancy, there was no need to tick the column regarding trade as the same was permitted by notification No. 180/98 and was not an existing business of respondent No. 2. In FIPB application, respondent No. 2 had disclosed that its existing business was Management Consultancy but it was proposing to undertake trading in Gold as well as exports of various products. FNC 2 or FNC 3 or 4 were not applicable to respondent No. 2 as it was a company incorporated in India in terms of notification No. 180 of 1998, which permitted foreign investments up to 51% in such companies. The fact that the respondent No. 2 applied to FIPB for 100% equity holding by respondent No. 4 clearly rebuts the presumption under Section 59 of the FERA against the respondents and establishes that the respondent No. 2 and its officers were not intending to violate the laws of India or the notifications or guidelines issued by the Government as well as RBI. Automatic approval route was adopted as the company was engaged in management consultancy also. The documents on record clearly show that the respondent No. 2 instead of establishing a marketing network tried to involve general public for the sale of its gold coins and offered them commission on sales. For this purpose, the respondent No. 2 planned to train those, who were willing to participate in the scheme to make earnings. It is pertinent to note that Cliff Roy as well as Paul Singh Claire had described themselves as Academic Instructors in their Bank Account opening forms. Had there been no business consultancy programme, this fact could not have come in the account opening forms of these persons. Form FC(RBI) Page 1305 was required to be filled up not because of trading or export activities which were permitted by notification No. 180/98 but because of Business Management Consultancy which was an Annexure III activity. Therefore, the ticking of Code 893 of the automatic approval route by respondent No. 2 was neither false nor malafide and as such, the learned Appellate Tribunal was justified in holding that the respondents had not tried to circumvent the provisions of FERA or the notifications/circulars issued by Government of India.
24. It is also shown that the respondents No. 2 to 4 had not transferred any money out of India except a part of salary by Cliff Roy and Paul Singh Claire. Foreign equity in respondent No. 2 was permissible. The only restriction was against the payment of dividend to foreign investors, which could be done only after respondent No. 2 had started exports from India, earned profits and got itself registered as an Export House. The exports by respondent No. 2 had just started and its registration as an export house was to follow but in the meanwhile, the respondent No. 2 was proceeded against by the appellant and its activities came to a standstill. Section 76 of FERA clearly shows that the Act aims at bringing foreign exchange into our country to the extent possible and prevent its outflow. In this case, the respondents No. 2 to 4 appear to have done nothing to offend Section 76 of FERA as no dividend was declared or remitted to foreign investors. The opening of the Bank Accounts also by respondent No. 3 and others with respondent No. 1 was not in violation of Section 30 of FERA inasmuch as they being the employees of respondent No. 2, could open such Bank Accounts and repatriate part of their earnings to their respective countries for the maintenance of their families in view of Act 29 of 1993 which amended Section 30(1) of FERA . There is no allegation that any dividend was remitted by respondent No. 2 to respondent No. 4, a foreign company, which had made investments in respondent No. 2.
25. Section 47(1) of FERA was also not violated for the reason that the respondent No. 2 was a trading company, which had plans to export. Actual exports could not be done from day one and in some cases, exports might not even take place for a variety of reasons but that does not mean that it can be held that the company never intended to undertake exports from India and was here for the purpose of trading only.
26. It is also shown on record that form FC(RBI) regarding which detailed submissions have been made by learned counsel for the parties was an out dated and old form and had not been updated in the light of new notifications. For example, the foreign technology transfer was not deleted from this Form in spite of the fact that a new form had been issued for the said purpose. Item VI(a) of this form also speaks of permission which is no longer required. Therefore, form FC(RBI) as filled up by respondent No. 2 does not establish that the respondent No. 2 had tried to mislead the authorities or had tried to conceal something from them. If any mis-statement was made therein, RBI could have itself sought clarifications from respondent No. 2 and its representatives. The letter dated 8.6.1999 written by RBI which says that approval for 51% foreign equity induction under automatic approval route was given only in view of the declaration that its activities were covered under NIC Code 893 and there was no approval for trading in gold coins does not defeat the argument of respondents No. 2 to 4 that the company was Page 1306 protected under the notifications 180/188 of 1998 and as such, their application for automatic approval under NIC code 893 does not ipso facto establish that it had violated the provisions of FERA since it is shown that respondent No. 2 was engaged in Business Management Consultancy also.
27. The allegations under Section 6(5) of FERA against respondent No. 1 Bank are also not established for the reason that the respondent No. 1 had imported gold not on behalf of respondent No. 2 but in its own right and on its own behalf and had then sold the same to respondent No. 2 and received payment thereof in Indian currency. Therefore, the gold was not imported on behalf of respondent No. 2 as alleged. The plea that there was a duty cast upon respondent No. 1 to reasonably satisfy itself that the transaction was not in contravention of any provisions of FERA or any rule, notification, direction or order made there under cannot be sustained as this duty is only in those cases where the Bank undertakes some foreign exchange transaction on behalf of someone but where the respondent No. 1 itself imported the gold and sold it to respondent No. 2, a Company incorporated in India, against Indian currency no violation of Section 6(5) of FERA is made out. The respondent No. 2 was purchasing gold in India and selling it also in India. Both the transactions were through Indian currency. Since the respondent No. 2 was a company incorporated in India and was not a foreign company, the respondent No. 1 was under no obligation to refuse a deal with it. It has been found that respondent No. 2 was a trading company which was to undertake exports also from India. The respondent No. 1, therefore, had not breached any provision of the FERA. The respondent No. 1 had no material to suspect that respondent No. 2 was in violation of FERA or any rule or notification there under and as such, the sale of gold to it was not prohibited. The transfer of funds on behalf of Cliff Roy and Paul Singh Claire was also not in violation of Section 30 of FERA for the reason that after the amendment of Section 30 of FERA the bar imposed on foreign nationals to take up employment in India had been removed and they were permitted to repatriate funds for the maintenance of their families. However, the adjudicating authority even had exonerated respondent No. 1 of this charge and as such, it is a non-issue.
28. In the result, this Court is of the considered view that in the present appeal, neither any question of law has been raised nor any legal infirmity has been found in the impugned orders passed by the Appellate Tribunal. The orders of Appellate Tribunal returned findings of fact in favor of the respondents that they had not committed any offence under FERA, 1973. The findings were neither perverse nor against material on record. The appellant has not been able to raise any question of law. No grounds are made out for interfering with the impugned orders.
29. The appeal, therefore, stands dismissed.