Uoi Thru Directorate Of ... vs Amway India Enterprises & Ors
2013 Latest Caselaw 5101 Del

*              IN THE HIGH COURT OF DELHI AT NEW DELHI

+                            CRL.A. 392/2007

                                                      Decided on 07.11.2013
IN THE MATTER OF :
UOI THRU DIRECTORATE OF ENFORCEMENT                               .... Appellant

                                 Through: Ms. Rajdipa Behura, Advocate



                           versus

AMWAY INDIA ENTERPRISES & ORS                      .....Respondents
                        Through: Mr. Anil K. Kher, Sr. Advocate with
                        Mr. Rishi Manchanda, Advocate for
                        respondents No.1 to 3

                                 Mr.Kartik Bajpai, Advocate for
                                 respondent No.4

CORAM
HON'BLE MS.JUSTICE HIMA KOHLI


HIMA KOHLI, J. (Oral)

1. The present appeal arises out of the common order dated

28.2.2007 passed by the Appellate Tribunal for Foreign Exchange

(hereinafter referred to as `the Tribunal‟) allowing Appeals No.262, 263,

264 & 301/2005 filed by the respondents No.1, 2, 3 & 4 respectively,

assailing a common adjudication order dated 7.2.2005 passed by the

Adjudicatory Authority imposing penalties against them for contravention

of Section 29(1)(a) of the Foreign Exchange Regulation Act,

1973(hereinafter referred to as `FERA‟).

2. Vide order dated 7.2.2005, the Adjudicatory Authority had disposed

of the notice to show cause dated 29.5.2002 addressed to the

respondents, calling upon each of them to show cause as to why the

adjudication proceedings contemplated under Section 51 of FERA should

not be initiated against them for contravention of the provisions of

Section 30 read with Para 11 D.2(ii) of the Exchange Control Manual (for

short `ECM‟) of FERA. The Adjudicatory Authority had found the

respondents No.1, 2 & 3 guilty of having contravened the provisions of

Section 30 read with Para 11 D.2(ii) of the ECM and the respondent No.4

guilty of having contravened the provisions of Section 64 (2) of FERA and

resultantly, imposed penalties of ₹80.00 lacs on the respondent No.1,

₹50.00 lacs on the respondent No.2, ₹12.00 lacs on the respondent No.3

and ₹30.00 lacs on the respondent No.4.

3. Assailing the aforesaid decision of the Adjudicatory Authority, all the

respondents had filed separate appeals registered as Appeals No.262,

263, 264 & 301/2005, that were disposed of by the Appellate Tribunal by

passing a common order dated 28.2.2007, whereunder the said appeals

were allowed and the adjudication order was set aside. Aggrieved by the

aforesaid decision of the Appellate Tribunal, the appellant/UOI has filed

the present appeal.

4. Ms.Rajdipa Behura, learned counsel for the appellant/UOI submits

that the impugned order is liable to be set aside for the reason that the

Appellate Tribunal had failed to appreciate the fact that there was a clear

contravention of Section of 30 of FERA by the respondents, particularly,

respondents No.2 & 3, who had possessed transit/business visas and not

an employment visa and the Reserve Bank of India (RBI) had not granted

any permission to them as contemplated under Section 30 of FERA. She

further states that as per the terms of the business visa issued by the

Ministry of Home Affairs, Government of India in favour of the

respondents no.2 & 3, who being foreign nationals, could not have stayed

in India for a period beyond three months and having transgressed the

said condition, they are liable to be prosecuted under Section 50 of the

FERA.

5. Lastly, learned counsel for the appellant/UOI submits that as per

the law, a foreign national working for gain in India is required to be

registered with the Ministry of Home Affairs, GOI and in the absence of an

employment visa, any registration with the Foreign Regional Registration

Office (for short 'FRRO') alone cannot be considered sufficient to permit

such a foreign national to work for gain in India. As far as the questions

of law raised by the appellant/UOI in the present appeal as mandated

under Section 35 of the Foreign Exchange Management Act, 1999 (for

short `FEMA‟) is concerned, learned counsel draws the attention of the

court to page 14 of the appeal paper book and states that the main

question of law required to be decided in the present appeal is, "Whether

the Tribunal was justified in cancelling the penalties imposed on the

respondents and set aside the adjudication order dated 7.2.2005 in

circumstances where they had failed to obtain a prior permission from the

RBI as contemplated under Section 30 of FERA?"

6. Mr.Anil K. Kher, Senior Advocate appearing for the respondents No.

1 to 3 supports the impugned order of the Appellate Tribunal and states

that it does not deserve any interference. He contends that as a matter

of fact, the appellant/UOI has not formulated any question of law for the

consideration of this Court in the present appeal. He further states that

Section 30 of FERA envisages prior permission by the RBI in favour of a

foreign national to enable him to practice any profession or undertake any

occupation, trade or business in India in circumstances where he desires

to acquire any foreign exchange for being remitted abroad from out of the

moneys received by him within the country on account of practicing of

such profession, trade, business, etc. and this Court is not required to

interpret the aforesaid provisions for the reason that the appellant/UOI

has not raised a purely legal question in the appeal. Rather, the

arguments advanced on behalf of the appellant/UOI involve a mixed

question of facts and law that have already been examined and

adjudicated upon at two levels, once before the Adjudicatory Authority

and the second time before the appellate authority and therefore, cannot

be re-agitated in these proceedings.

7. It is further stated on behalf of the respondents No.1 to 3 that

Section 74 of FERA, empowers the RBI to delegate any of its powers or

functions as stipulated in the said provision and in exercise thereof, the

RBI has appointed certain banks as authorized dealers on its behalf to

allow remittance of fees, remuneration, etc., for foreign nationals

engaged by Indian companies, subject to the limitations and conditions

imposed in that regard, but after 8.1.1993, when sub-section (1) of

Section 30 of FERA came to be amended, no permission is required from

the RBI for engaging foreign nationals.

8. Mr. Kher, Senior Advocate argues that while passing the order

dated 7.2.2005, the Adjudicatory Authority had exceeded its brief by

holding inter alia that respondents No.2 and 3, who are foreign nationals,

came to India on a business visa and not on employment visa and as they

were practicing a profession in India while holding business visas, they

were required to obtain prior permission of the RBI, which was not

obtained whereas the correct position is that after the amendment of sub-

section(1) of Section 30 of FERA, no such permission was required to be

obtained from RBI.

9. The Court has heard the arguments advanced by the counsels for

the parties and carefully examined the trial court record. Before dealing

with the submissions made by both sides, it is deemed necessary to

recapitulate the relevant facts of the case that are as follows:

10. On 1.5.1995, respondent No.1 had entered into an agreement with

its parent company, M/s Amway Corporation, USA to acquire the services

of the respondent No.2 in India. On 1.3.1998, the respondent No.1

had entered into an agreement with M/s Amway Corporation, Australia to

acquire the services of the respondent No.3 in India. In accordance with

the terms of the aforesaid agreements, the salaries payable to the

respondents No.2 & 3 were remitted by respondent No.1 to M/s Amway

Corporation, USA and M/s Amway Corporation, Australia. The remittances

made to respondent No.2 covered the period between 1997 to 1999 and

the remittances made to the respondent No.3 covered the period w.e.f.

1998 to 2000.

11. It is an undisputed position that remittances were made by the

respondent No.1 in favour of the respondents No.2 & 3 through the

respondent No.4 bank. Under para 11 D.2(ii) of the ECM, as existing

prior to October, 1997, prior clearance of the Ministry of Home Affairs,

Government of India was required to be obtained if the period of

engagement of a foreign national exceeded one year at a time. The

aforesaid guidelines of the ECM were however modified on 29.10.1997,

and in consultation with the Government of India, it was decided to

dispense with the requirement of obtaining prior clearance of the Ministry

of Home Affairs in such cases, provided that the concerned foreign

national held a valid employment visa. The relevant extract of the

amendment to the ECM is reproduced hereinbelow for ready reference :

"3. Short term Engagement of Foreign Nationals

3.1 Attention is invited to paragraph 11D.2 of ECM in terms of which authorized dealers have been permitted to allow remittances in connection with the short term engagement of foreign nationals by Indian firms/companies upto 12 man- months in a calendar year subject to certain conditions which,

among other things, include that the concerned foreign national should hold a valid visa, i.e., employment, business, tourist, etc., and if the period of engagement exceeds three months, the foreign national should hold a valid employment visa. It has now been decided to remove the ceiling of 12 man-months prescribed for short term engagement of foreign nationals by Indian firms/companies. Authorized dealers may henceforth allow remittance in connection with the engagement of foreign nationals by Indian firms/companies without any limit on the total duration of engagement of foreign nationals in any calendar year.

3.2 In terms of paragraph 11D.2(ii) of ECM, prior clearance of Ministry of Home Affairs (MHA), Government of India, is required to be obtained if the period of engagement of a foreign national exceeds one year at a time. It has been decided, in consultation with the Government of India, to dispense with the prior clearance of MHA in such cases provided the foreign national concerned holds a valid employment visa."

12. It is the case of the respondent No.1 that despite the aforesaid

relaxation of the norms, the respondent No.1 continued to approach the

RBI as before, with a request for grant of approval for making remittances

of foreign currency in favour of the respondents No.2 & 3 outside India,

which were duly granted from time to time. Post amendment, the RBI

had directed the respondent No.1 to approach its authorized dealer for

processing its case in terms of para 11 D.2(ii) of the ECM.

13. On 29.5.2002, the Directorate of Enforcement issued a notice to

show cause to the respondents for alleged contravention of Section 30

read with Para 11 D.2(ii) of the FERA. The respondents had replied to the

aforesaid notice to show cause, whereafter the Adjudicatory Authority

observed that the respondents No.2 & 3, both foreign nationals, had

arrived in India in the years 1995 and 1998 respectively, as per their

respective service agreements and since both of them were on business

visas and not on employment visas, they were required to obtain prior

permission of the RBI under Section 30 of the FERA because they were

practicing a profession in India.

14. The Adjudicatory Authority went on to draw a distinction between

foreign nationals holding employment visas whose period of engagement

exceeds one year, and other foreign nationals who have business visas,

and held that as the cases of respondents No.2 & 3 herein fell in the latter

category, the provisions of para 11D.2 of ECM would not apply to them.

As a consequence thereof, the respondent No.1 was held guilty of having

contravened the provisions of Section 30 read with para 11D.2 of ECM for

having remitted the salaries of the respondents No.2 & 3 abroad and the

respondents No.2 & 3 were held guilty of having contravened the

aforesaid provisions in the same manner. Further, the Adjudicatory

Authority held respondent No.4 bank guilty for having contravened the

provisions of Section 64 (2) of the FERA and penalties were imposed on

all the said respondents under Section 50 of the Act.

15. Aggrieved by the aforesaid decision, the respondents herein had

preferred independent appeals, which came to be allowed by a common

order dated 28.2.2007 passed by the Appellate Tribunal, wherein it was

held that the first condition of para 11D.2 of ECM had been fulfilled by the

respondents for the reason that service agreements had been executed

between the respondents No.1 and No.2 and the respondents No.1 and 3

respectively, whereunder remittances of foreign currencies were made to

USA and Australia in accordance with the terms of the agreements. As

for the prior permission allegedly required to be obtained from the RBI, it

was observed by the Tribunal that the FRRO had registered respondents

No.2 & 3 and issued them residential permits under the Registration of

Foreigners Rule, 1939.

16. The contention of the appellant/UOI that registration of the

respondents No.2 & 3 with the FRRO is irrelevant as it is manned by a

personnel deputed by the Delhi Police was turned down and Tribunal held

that the said office comes under the wings of the Ministry of Home Affairs,

GOI and no evidence to the contrary had been placed on record by the

Enforcement Directorate. Thus, the Appellate Tribunal concluded that the

respondents No.2 & 3 were employees of the respondent No.1 and even

in the absence of an employment visa, their service agreements executed

with the respondent No.1 bear out the said position. As a result, the

observation made by the Adjudicatory Authority that the respondents

No.2 & 3 were practicing a profession in India was turned down and the

order dated 7.2.2005 was set aside.

17. Similarly, the appeal of the respondent No.4/bank was allowed by

the Tribunal and it was held that when the other respondents No.1 to 3

had not contravened the provisions of the FERA, it could not be held that

the respondent No.4/Bank had committed any contravention.

18. The contention of the counsel for the appellant/UOI that the

Appellate Tribunal had failed to appreciate the fact that the respondents

No.1 to 3 had not obtained any permission from the RBI and that the

respondents No.2 & 3 possess only business visa and not employment

visas, are questions of fact that have been duly adjudicated upon by the

Appellate Tribunal. Despite the fact that the scope of the present appeal

ought to be confined to the question of law raised therein, as prescribed

under Section 35 of FEMA, in view of the arguments addressed by both

sides, this Court has perused the trial court record and is satisfied that

the Appellate Tribunal has taken into consideration the documents filed by

the respondents No.1 to 3 before arriving at the conclusion that requisite

permissions had been duly obtained by them from the RBI before

remitting foreign exchange abroad.

19. As for the argument advanced on behalf of the appellant/UOI that

the respondents No.2 & 3 had never held employment visas and they had

continued to hold transit visas and that they had not registered

themselves with the Ministry of Home Affairs, GOI, at the cost of

repetition, it may be reiterated that the aforesaid argument is also not

premised on any question of law raised by the UOI in the present appeal.

Rather, it is purely a question of fact that has been duly examined by the

Appellate Tribunal and negated on the basis of the documents filed by the

respondents. For taking the aforesaid view, this Court is fortified by the

decision of the Supreme Court in the case of Raj Kumar Shivhare vs.

Assistant Director, Directorate of Enforcement & Anr., reported as AIR

2010 SC 2239, wherein it was held that under Section 35 of FEMA, the

legislature has conferred a right of appeal to a person aggrieved from

„any‟, „order‟ or „decision‟ of the Appellate Tribunal only on a question of

law.

20. It is also pertinent to note that any argument sought to be urged by

the appellant/UOI in respect of the employment visas of the respondents

No.2 & 3 is beyond the scope of the notice to show cause that was

originally issued to them by the Adjudicatory Authority and this ground

can hardly be urged at the stage of second appeal. As a matter of fact,

the learned Adjudicatory Authority had gone beyond the scope of the

notice to show cause while making observations in the order dated

7.2.2005 with regard to the employment visa of the respondents No.2 &

3, which was never an issue raised in the said notice addressed to the

respondents. The aforesaid observation is borne out on a bare perusal of

the contents of the Memorandum dated 29.5.2002 issued by the

Directorate. Having failed to take up the said issue at the relevant point of

time, the question of the noticees responding to the said issue in their

replies, did not arise and now the appellant is barred in law from agitating

the said issue at this belated stage, and that too at the stage of appeal.

21. Finally, coming to the last limb of the arguments canvassed by the

learned counsel for the appellant/UOI with regard to the non-compliance

of Section 30 of the FERA, the aforesaid provision is reproduced

hereinbelow for ready reference :

"30. Prior permission of Reserve Bank required for taking up employment, etc., in India by nationals of foreign States - (1) No national of a foreign State shall, without the previous permission of the Reserve Bank, practice any profession or carry on any occupation, trade or business in India in a case where such national desires to acquire any foreign exchange (such foreign exchanging being intended for remittance outside India) out of any moneys received by him in India by reason of the practicing of such profession or the carrying on of such occupation, trade or business, as the case may be.

(2) Where any national of a foreign State desires to obtain the permission of the Reserve Bank under sub-section (1), he may make an application to the Reserve Bank in such form, in such manner and containing such particulars as may be prescribed.

(3) On receipt of an application under sub-section (2), the Reserve Bank may, after making such inquiry as it deems fit, allow the application subject to such conditions, if any, as it may think fit to impose or reject the application.

Provided that no application shall be rejected under this sub-section unless the applicant has been given a reasonable opportunity for making a representation in the matter."

22. As is apparent from a perusal of the aforesaid provision, no foreign

national can practice any profession or carry out any occupation, trade or

business in India without prior permission of the RBI for the purpose of

acquiring foreign exchange with the intention of remitting it outside India

out of moneys received by him in India as a consequence of practicing

such profession, occupation, trade, business, etc. Sub-section (1) of

Section 30 was amended by Act 29 of 1993 and it was substituted w.e.f.

8.1.1993. On the date of issuance of the Show Cause Notice dated

29.5.2002, the amended sub-section (1) of Section 30 was applicable to

the facts of the present case. Furthermore, as noted earlier, Para 11

D.2(ii) of the ECM had also been amended w.e.f. 29.11.1997.

23. Prior to the amendment of the aforesaid Paragraph 11, authorized

dealers of the RBI were permitted to allow remittance in connection with

short term engagement of foreign nationals by Indian firms/companies

upto 12 man-months in a calendar year on certain conditions, which

included a requirement for such a foreign national to hold a valid visa for

employment, business, tourism, etc., and if the period of engagement

exceeded three months, such a foreign national was required to hold a

valid employment visa. However, post amendment, the ceiling of 12

man-months in a calendar year was done away with and authorized

dealers of the RBI were allowed to make remittance in connection with

engagement of foreign nationals by Indian firms/companies without

imposing any limitation on the total duration of their engagement in a

calendar year. Additionally, the requirement of obtaining prior clearances

from the Ministry of Home Affairs, GOI for foreign nationals holding valid

employment visa was also done away with.

24. In view of the aforesaid changed legal position on the date of

accrual of the cause of action, i.e., in the year 2002, when the show

cause notice was issued to the respondents, it cannot be held that there

was any violation of Section 30 of the FERA by any or all the respondents

for the reason that the records clearly reveal that the respondent No.1

had duly approached the RBI for obtaining prior permission for remitting

foreign currency on account of salaries paid to the respondents No.2 & 3,

both foreign nationals, in terms of their service agreements executed in

the years 1995 and 1998 respectively. Moreover, the records reveal that

the FRRO had duly issued residential permission to the respondents No.2

& 3 under the Registration of Foreigners Rule, 1939 and thus, they were

well entitled to obtain employment with the respondent No.1 in India

during the relevant period.

25. In view of the aforesaid facts and circumstances, this Court is of the

opinion that the impugned order dated 28.2.2007 passed by the Appellate

Tribunal is a legal and valid order and does not deserve any interference.

The Tribunal was quite justified in setting aside the penalties imposed on

the respondents and quashing the adjudication order dated 7.2.2005, as

there was no contravention of the provision of Section 30 of FERA by any

of the respondents. As a result, the present appeal fails and is accordingly

dismissed.

26. Trial court record be released forthwith.

                                                          (HIMA KOHLI)
NOVEMBER          07, 2013                                   JUDGE
mk/sk