[Cites 18, Cited by 0]
Delhi High Court
Sunita Mehta vs Special Director Enf.Dte on 8 April, 2026
Author: Navin Chawla
Bench: Navin Chawla
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 11.03.2026
Pronounced on: 08.04.2026
+ MISC. APPEAL (FEMA) 2/2025
+ MISC. APPEAL (FEMA) 3/2025
+ MISC. APPEAL (FEMA) 4/2025
SUNITA MEHTA .....Appellant
SUBASH MEHTA .....Appellant
SANJAY MEHTA .....Appellant
Through: Mr.R.K. Handoo, Mr.Yoginder
Handoo, Mr.Ashwin Kataria,
Mr.Garvit Solanki, Mr.Gaurav
Vishwakarma, Mr.Aditya
Aggarwal, Advs.
versus
SPECIAL DIRECTOR ENFORCEMENT DIRECTORATE
.....Respondent
Through: Mr.Arkaj Kumar, SC with
Mr.Aakarsh Mishra,
Ms.Vaishanavi Bhargava,
Mr.Akshat Khanna and
Mr.Karsh Sarosh Rebelo, Advs.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
HON'BLE MR. JUSTICE RAVINDER DUDEJA
JUDGMENT
NAVIN CHAWLA, J.
1. These appeals have been filed by the appellant(s) under Section
35 of the Foreign Exchange Management Act, 1999 (hereinafter
referred to as „FEMA‟) challenging the final orders passed by the
learned Appellate Tribunal for Foreign Exchange in the appeals,
details of which are mentioned in the form of a chart hereinunder for
easy reference:
Appeal No. before this Appeal No. before the Date of the
Court Appellate Tribunal Impugned Order
MISC. APPEAL (FEMA) Appeal No. 212/2010 31.05.2012
MISC. APPEAL (FEMA) Appeal No. 210/2010 31.05.2012
MISC. APPEAL (FEMA) Appeal No. 213/2010 31.05.2012
2. As the three appeals arise from the common facts and raise
common issues, they are being taken up together for disposal by way
of this common judgment.
3. The following Show Cause Notices were issued to the
appellant(s), which resulted, first in the Adjudication Order No.
ADJ/25-28/B/SDE/RAJ/2010/FEMA dated 17.08.2010 passed by the
Adjudicating Authority and thereafter, the impugned order of the
Appellate Tribunal. For the sake of easy reference, they are detailed
hereinunder in the form of a chart:
Appeal No. Appeal No. Date of show cause Date of the
before this before the notice order of the
Court Appellate Adjudicating
Tribunal Authority
MISC. APPEAL Appeal No. SCN No. T-4/07- 17.08.2010
(FEMA) No. 213/2010 B/SDE/KNR/2008
4/2025 dated 12.09.2008
MISC. APPEAL Appeal No. SCN No. T-4/16- 17.08.2010
(FEMA) No. 210/2010 and B/SDE/KNR/2008
2/2025 and 212/2010 dated 31.10.2008
MISC. APPEAL Appeal No. SCN No. T-4/66- 17.08.2010
(FEMA) No. 210/2010 B/SDE/KNR/2009
3/2025 dated 24.02.2009
MISC. APPEAL Appeal No. SCN No. T-4/28- 17.08.2010
(FEMA) No. 210/2010 B/SDE/KNR/2009
3/2025 dated 07.05.2009
4. The show cause notices allege contravention of Section 3(b) of
FEMA, read with Section 6(3)(f) of FEMA and Regulation 5(1)(iv)
and Schedule 4 of the Foreign Exchange Management (Deposit)
Regulations, 2000 (hereinafter referred to as „Regulations‟). All the
show cause notices are premised on allegations that the appellant(s)
had opened „Non-Resident (Non-Repatriable) Rupee Accounts‟
(„NRNR Accounts‟) while they were in Canada. They had, later, in the
year 2001, obtained loans against these NRNR Accounts, the proceeds
of which were then used by the appellant(s) to open further NRNR
Accounts with other banks. It was alleged that the opening of the
subsequent NRNR Account with funds which did not come from
outside India but were raised in the form of a loan within India,
amounted to contravention of provisions of Section 6(3)(f) of FEMA
read with Regulation 5(1)(iv) and Schedule 4 of the Regulations.
5. In response to these show cause notices, the appellant(s) had
asserted that in the year 2001, they found out that the cooperative
banks where they had opened their NRNR Accounts, were in financial
trouble. They came to India to withdraw their money from these
accounts, however, the banks were not ready to do so and instead
advised that the amount be taken by them as a loan. Having no choice,
they withdrew the money in form of loan and then reinvested the
money in the subsequently opened NRNR Accounts.
6. The Adjudicating Authority, vide its common order dated
17.08.2010, imposed penalties on the appellant(s) and also ordered the
confiscation of the amount lying in their NRNR Accounts.
7. Aggrieved by the same, the appellant(s) filed appeals under
Section 19 of FEMA before the Appellate Tribunal, however, the same
were dismissed by the Appellate Tribunal by way of its common order
dated 31.05.2012, impugned in the present set of appeals.
SUBMISSIONS OF THE LEARNED COUNSEL FOR THE
APPELLANT(S):
8. Mr.R.K. Handoo, the learned counsel appearing for the
appellant(s), submits that the impugned order of the learned Tribunal
fails to appreciate that Regulation 5(1)(iv) of the Regulations,
violation of which has been alleged against the appellant(s), casts a
duty only on the „Authorised Dealer‟ and, therefore, any contravention
of the same can only lead to a penalty proceeding against such
„Authorised Dealer‟ and not against the appellant(s) who had opened
such accounts.
9. He further submits that, in any case, Regulation 5(1)(iv) of the
Regulations stood omitted by a Notification dated 01.03.2002. As the
show cause notices were issued thereafter, the same were not
maintainable and liable to be quashed on this ground. In support, he
places reliance on the judgment of the Supreme Court in Rayala
Corporation (P) Ltd. & Anr. v. Director of Enforcement, New Delhi,
(1969) 2 SCC 412.
10. He further submits that in terms of the Circular dated
04.03.2002 issued by the Reserve Bank of India, the maturity
proceeds of the deposits under NRNR Accounts could be credited to
the account holder‟s Non-Resident (External) Rupee Account („NRE
Account‟), which was freely convertible. He submits that, therefore,
even assuming a technical violation in opening the new accounts, the
appellant(s) could not have been penalised.
11. He submits that without prejudice to the above, no reason has
been assigned for confiscating the amount lying to the credit of the
accounts of the appellant(s) in addition to the penalty imposed upon
them. He submits that being an order without reason, the same is
liable to be set aside as confiscation of the amount lying in the NRNR
accounts cannot be automatic under FEMA.
SUBMISSIONS OF THE LEARNED COUNSEL FOR THE
RESPONDENT:
12. Mr.Arkaj Kumar, the learned standing counsel appearing for the
respondent, on the other hand, submits that in terms of Schedule 4 of
the Regulations, an NRNR Account can be opened only from the
funds remitted from outside India. He submits that in terms of Clause
8 of Schedule 4 of the Regulations, loans/overdrafts against the
security of these deposits can be utilised only for personal purposes or
for carrying on business activities and not for re-lending. He submits
that, therefore, the amount of the loan could not have been re-invested
by the appellant(s) by opening further NRNR Accounts.
13. He submits that, therefore, there was a violation of Regulation
5(1)(iv) read with Schedule 4 of the Regulations, making the
appellant(s) liable for not only imposition of penalty under Section
13(1) of FEMA, but also of confiscation of the amount under Section
13(2) of FEMA. He submits that no separate reasons are required to
be given for the purposes of confiscation as it is at the discretion of the
Adjudicating Authority.
14. On the submission of omission of Regulation 5(1)(iv) of the
Regulations, placing reliance on the judgments of the Supreme Court
in Fibre Boards Private Limited, Bangalore v. Commissioner of
Income Tax, Bangalore, (2015) 10 SCC 333 and Shree Bhagwati
Steel Rolling Mills v. Commissioner of Central Excise & Anr., (2016)
3 SCC 643, he submits that in terms of Section 6 and Section 6A of
the General Clauses Act, 1897, mere repeal of the Regulation would
not absolve the appellant(s) of the consequences of their violation
while the Regulations were in force. He submits that the judgment of
the Supreme Court in Rayala Corporation (P) Ltd. (supra) has also
been distinguished by the Supreme Court in the above referred
judgments.
ANALYSIS AND FINDINGS
15. We have considered the submissions made by the learned
counsels for the parties as also perused the records of the appeals.
16. Regulation 5(1)(iv) of the Regulations reads as under:
"5. Acceptance of deposits by an Authorised
Dealer/authorised bank from persons
resident outside India. -(1) An Authorised
Dealer in India may accept deposit-
(iv) under the Non-resident (Non-Repatriable)
Rupee Account Scheme, (NRNR account),
specified in Schedule 4, from any person
resident outside India."
17. In terms of the above Regulation, an Authorised Dealer in India
may accept, under an NRNR Account, amounts from any person
resident outside India in accordance with the Scheme specified in
Schedule 4 of the Regulations.
18. Schedule 4 of the Regulations, in turn, provides that any person
resident outside India (except individuals/entities of
Pakistan/Bangladesh nationality/ownership) may open NRNR
Accounts with an Authorised Dealer, and that such accounts should be
opened in Indian rupees out of funds remitted from outside India
through normal banking channels. It further states that premature
withdrawal of NRE/FCNR deposits for opening NRNR deposits with
an Authorised Dealer other than the one with whom the NRE/FCNR
account is maintained will attract a penalty, if any, as per the
directions issued by the Reserve Bank of India from time to time. It
further states that loans/overdrafts in India against the security of these
deposits may be granted by the Authorised Dealer to account
holders/third parties for personal purposes or for carrying on business
activities and not for carrying on agricultural/plantation activities or
real estate business, or for relending. Clauses 1 and 8 of Schedule 4 of
the Regulations are reproduced hereinunder:
"1. Eligibility.--Any person resident outside
(except individuals/entities of
Pakistan/Bangladesh nationality/ownership)
may open NRNR accounts with an Authorised
Dealer.
Accounts should be opened in Indian
rupees out of the funds remitted from outside
India through normal banking channels (in
freely convertible currency). In the case of
NRIs/OCBs, such accounts may also be
opened by transfer of funds from their existing
NRE/FCNR deposit accounts. Premature
withdrawal of NRE/FCNR deposits for
opening NRNR deposits with an Authorised
Dealer other than the one with whom the
NRE/FCNR account is maintained will attract
penalty, if any, as per the directions issued by
Reserve Bank from time to time.
xxx
8. Loans/overdrafts.--Loans/overdrafts
in India, against the security of these deposits
may be granted by the Authorised Dealer to
account holders/third parties for personal
purposes or for carrying on business activities
and not for carrying on agricultural/plantation
activities or real estate business, or for
relending, subject to their normal commercial
judgement. Repayment of loans/liquidation of
overdraft to the account holder shall be by
way of inward remittance from outside India
through normal banking channels or by debit
to NRE/FCNR/NRO/NRNR/NRSR account of
the depositor or by adjustment against
maturity proceeds of deposit. Repayment of
loans availed by third parties may be made out
of their own resources."
19. From the above, it would be evident that while Regulation
5(1)(iv) of the Regulations permits an Authorised Dealer to accept a
deposit under the NRNR Account, such an account can be opened
only by a person who is a resident outside India and through the funds
remitted from outside India. The obligation cast is, therefore, both on
the Authorised Dealer as also on such person who owns the account. A
violation of the same in terms of Section 13(1) of FEMA would
therefore attract a penalty for both, that is, the Authorised Dealer as
also the account holder. We quote Section 13(1) of FEMA as under:
"13. Penalties.--(1) If any person contravenes
any provision of this Act, or contravenes any
rule, regulation, notification, direction or
order issued in exercise of the powers under
this Act, or contravenes any condition subject
to which an authorisation is issued by the
Reserve Bank, he shall, upon adjudication, be
liable to a penalty up to thrice the sum
involved in such contravention where such
amount is quantifiable, or up to two lakh
rupees where the amount is not quantifiable,
and where such contravention is a continuing
one, further penalty which may extend to five
thousand rupees for every day after the first
day during which the contravention
continues."
20. From the above, the submission of the learned counsel for the
appellant(s) that penalty for the violation of Regulation 5(1)(iv) read
with Schedule 4 of the Regulations can be imposed only on the
Authorised Dealer and not on the appellant(s), therefore, cannot be
accepted.
21. As regards the omission of Regulation 5(1)(iv) of the
Regulations by the Notification dated 01.03.2002 and its effect on the
subsequently issued show cause notices to the appellant(s), we shall
first quote Section 6 and Section 6A of the General Clauses Act as
under:
"6. Effect of repeal.--Where this Act, or any
Central Act or Regulation made after the
commencement of this Act, repeals any
enactment hitherto made or hereafter to be
made, then, unless a different intention
appears, the repeal shall not--
(a) revive anything not in force or
existing at the time at which the repeal takes
effect; or
(b) affect the previous operation of any
enactment so repealed or anything duly done
or suffered thereunder; or
(c) affect any right, privilege,
obligation or liability acquired, accrued or
incurred under any enactment so repealed; or
(d) affect any penalty, forfeiture or
punishment incurred in respect of any offence
committed against any enactment so repealed;
or
(e) affect any investigation, legal
proceeding or remedy in respect of any such
right, privilege, obligation, liability, penalty,
forfeiture or punishment as aforesaid;
and any such investigation, legal proceeding
or remedy may be instituted, continued or
enforced, and any such penalty, forfeiture or
punishment may be imposed as if the repealing
Act or Regulation had not been passed.
6A. Repeal of Act making textual amendment
in Act or Regulation.--Where any Central Act
or Regulation made after the commencement
of this Act repeals any enactment by which the
text of any Central Act or Regulation was
amended by the express omission, insertion or
substitution of any matter, then, unless a
different intention appears, the repeal shall not
affect the continuance of any such amendment
made by the enactment so repealed and in
operation at the time of such repeal."
22. In Rayala Corporation (P) Ltd. (supra), the Supreme Court,
while considering the omission of Rule 132A of the Defence of India
Rules by a Notification of Ministry of Home Affairs dated 30.03.1965,
and its effect on the subsequently instituted proceedings on
17.03.1968, held that the proceedings were not maintainable as the
saving clause therein would only protect the action already taken
while the Rule was in force. The said judgment, however, was
explained and distinguished in Fibre Boards Private Limited,
Bangalore (supra) and later in Shree Bhagwati Steel Rolling Mills
(supra). In Shree Bhagwati Steel Rolling Mills (supra), wherein the
Supreme Court observed as under:
"13. On a conjoint reading of the three
expressions "delete", "omit", and "repeal", it
becomes clear that "delete" and "omit" are
used interchangeably, so that when the
expression "repeal" refers to "delete" it
would necessarily take within its ken an
omission as well. This being the case, we do
not find any substance in the argument that a
"repeal" amounts to an obliteration from the
very beginning, whereas an "omission" is only
in futuro. If the expression "delete" would
amount to a "repeal", which the appellant's
counsel does not deny, it is clear that a
conjoint reading of Halsbury's Laws of
England and the Legal Thesaurus cited
hereinabove both lead to the same result,
namely, that an "omission" being tantamount
to a "deletion" is a form of repeal.
14. The learned counsel's second argument
that Section 6-A of the General Clauses Act
when it speaks of an "omission" only speaks
of an "amendment" which omits and,
therefore does not refer to a repeal, is equally
fallacious. In Bhagat Ram Sharma v. Union of
India, this Court held that there is no real
distinction between a repeal and an
amendment and that "amendment" is in fact a
wider term which includes deletion of a
provision in an existing statute. In the said
judgment, this Court held : (SCC pp. 40-41,
paras 17-18)
"17. It is a matter of legislative
practice to provide while enacting an
amending law, that an existing
provision shall be deleted and a new
provision substituted. Such deletion
has the effect of repeal of the existing
provision. Such a law may also
provide for the introduction of a new
provision. There is no real distinction
between „repeal‟ and an
„amendment‟. In Sutherland's
Statutory Construction, 3rd Edn., Vol.
1 at p. 477, the learned author makes
the following statement of law:
„The distinction between repeal
and amendment as these terms are
used by the courts, is arbitrary.
Naturally the use of these terms by
the court is based largely on how the
legislatures have developed and
applied these terms in labelling their
enactments. When a section is being
added to an Act or a provision added
to a section, the legislatures
commonly entitled the Act as an
amendment.... When a provision is
withdrawn from a section, the
legislatures call the Act an
amendment particularly when a
provision is added to replace the one
withdrawn. However, when an entire
Act or section is abrogated and no
new section is added to replace it,
legislatures label the Act
accomplishing this result a repeal.
Thus as used by the legislatures,
amendment and repeal may differ in
kind--addition as opposed to
withdrawal or only in degree--
abrogation of part of a section as
opposed to abrogation of a whole
section or Act; or more commonly, in
both kind and degree--addition of a
provision to a section to replace a
provision being abrogated as opposed
by abrogation of a whole section of
an Act. This arbitrary distinction has
been followed by the courts, and they
have developed separate rules of
construction for each. However, they
have recognised that frequently an
Act purporting to be an amendment
has the same qualitative effect as a
repeal--the abrogation of an existing
statutory provision--and have
therefore applied the term "implied
repeal" and the rules of construction
applicable to repeals to such
amendments.‟
18. Amendment is, in fact, a wider
term and it includes abrogation or
deletion of a provision in an existing
statute. If the amendment of an
existing law is small, the Act
professes to amend; if it is extensive,
it repeals a law and re-enacts it. An
amendment of substantive law is not
retrospective unless expressly laid
down or by necessary implication
inferred."
(emphasis supplied)
15. It is clear, therefore, that when this
Court referred to Section 6-A of the General
Clauses Act in Fibre Board case and held that
Section 6-A shows that a repeal can be by way
of an express omission, obviously what was
meant was that an amendment which repealed
a provision could do so by way of an express
omission. This being the case, it is clear that
Section 6-A undisputedly leads to the
conclusion that a repeal would include a
repeal by way of an express omission.
16. The learned counsel then argued that
while distinguishing the Madhya Pradesh
High Court judgment in Rayala Corpn. a
Constitution Bench of this Court expressly
held as the first reason that Section 6 applies
only to repeals and not to omissions.
The Fibre Board judgment has clearly held as
follows : (SCC p. 354, para 31)
"31. First and foremost, it will be
noticed that two reasons were given
in Rayala Corpn. (P) Ltd. [Rayala
Corpn. (P) Ltd. v. Director of
Enforcement, (1969) 2 SCC 412] for
distinguishing the Madhya Pradesh
High Court judgment. Ordinarily,
both reasons would form the ratio
decidendi for the said decision and
both reasons would be binding upon
us. But we find that once it is held
that Section 6 of the General Clauses
Act would itself not apply to a rule
which is subordinate legislation as it
applies only to a Central Act or
Regulation, it would be wholly
unnecessary to state that on a
construction of the word „repeal‟ in
Section 6 of the General Clauses Act,
„omissions‟ made by the legislature
would not be included. Assume, on
the other hand, that the Constitution
Bench had given two reasons for the
non-applicability of Section 6 of the
General Clauses Act. In such a
situation, obviously both reasons
would be ratio decidendi and would
be binding upon a subsequent Bench.
However, once it is found that Section
6 itself would not apply, it would be
wholly superfluous to further state
that on an interpretation of the word
„repeal‟, an „omission‟ would not be
included. We are, therefore, of the
view that the second so-called ratio of
the Constitution Bench in Rayala
Corpn. (P) Ltd. cannot be said to be a
ratio decidendi at all and is really in
the nature of obiter dicta."
17. Merely because the Constitution Bench
referred to a repeal not amounting to an
omission as the first reason given for
distinguishing the Madhya Pradesh High
Court judgment would not undo the effect of
ITR para 27 : SCC para 31 of Fibre Board
case which, as has already been stated, clearly
makes the distinction between Section 6 not
applying at all and Section 6 being construed
in a particular manner. Obviously, if the
section were not to apply at all, any
construction of the section would necessarily
be in the nature of obiter dicta.
18. We also find that Section 6 of the
General Clauses Act could not possibly apply
to the facts in Rayala Corpn. case for yet
another reason. Clause (2) of Rule 132-A of
the Defence of India (Amendment) Rules, 1965
which was referred to in para 14 of the
judgment in Rayala Corpn. reads as follows :
(SCC p. 423)
"14. ... „132-A. (2) In the Defence
of India Rules, 1962, Rule 132-A
(relating to prohibition of dealings in
foreign exchange) shall be omitted
except as respects things done or
omitted to be done under that rule.‟"
19. A cursory reading of clause (2) shows
that after omitting Rule 132-A of the Defence
of India Rules, 1962, the provision contains its
own saving clause. This being the case,
Section 6 can in any case have no application
as Section 6 only applies to a Central Act or
Regulation "unless a different intention
appears". A different intention clearly appears
on a reading of clause (2) as only a very
limited savings clause is incorporated therein.
In fact, this aspect is noticed by the
Constitution Bench in para 18 of its judgment,
in which the Constitution Bench states:
(Rayala Corpn. case , SCC p. 425)
"18. ...As we have indicated
earlier, the notification of the
Ministry of Home Affairs omitting
Rule 132-A of the DIRs did not make
any such provision similar to that
contained in Section 6 of the General
Clauses Act.""
23. In the present case, the only effect of the omission of
Regulation 5(1)(iv) of the Regulations is that the Authorised Dealers
cannot now accept NRNR Accounts. It does not obliterate the
violation, if any, and the effect thereof prior to such omission.
24. In this regard, Regulation 2(a)(iii) of the Foreign Exchange
Management (Deposit) (Amendment) Regulations, 2002, by which
Regulation 5(1)(iv) of the Regulations was deleted, so far as it is
relevant, is reproduced hereinbelow:
"2.In the Foreign Exchange Management
(Deposit) Regulations, 2000.
(a) in Regulation 5,
(i) in sub-regulation (1), clauses (iv) and
(v) shall be omitted;
(ii) in sub-regulation (2), for the words
and figures "clauses (i), (iii) and
(v)", the words and figures
"clauses (i) and (iii)" shall be
substituted;
(iii) after sub-regulation (2), the following sub-
regulation shall be added, namely:-
"(3)(a) On and from 1st April 2002,
(i) no deposit, whether by way of renewal of
existing deposit or otherwise, shall be
accepted under the Non-Resident (Non-
Repatriable) Rupee Account Scheme (NRNR
Account) or the Non-Resident (Special) Rupee
Account Scheme (NRSR Account);
(ii) existing deposits under the NRNR Account
Scheme may be continued only upto the date of
maturity;
(iii) on maturity of the existing deposit under
the NRNR Account Scheme, the maturity
proceeds shall be credited to the
accountholder‟s Non-Resident (External)
Account (NRE Account), after giving notice to
the account holder."
25. In view of the above and the law as explained by the Supreme
Court in Shree Bhagwati Steel Rolling Mills (supra), we, therefore,
find no merit in the submission of the learned counsel for the
appellant(s) that on the omission of Regulation 5(1)(iv) of the
Regulations, show cause notice for a prior violation could not be
issued to the appellant(s). In fact, the only effect of the Amendment
Regulation is that from that date, NRNR accounts cannot be opened or
renewed by the Authorised Dealer. The existing NRNR accounts
could, in fact, continue till their date of maturity, whereafter the
maturity proceeds were to be credited to the account holder‟s NRE
account after giving notice to the account holder.
26. The Circular dated 04.03.2002 also directed that the existing
accounts under the NRNR Accounts Scheme may be continued only
up to the date of maturity whereafter they shall be credited to the
account holder‟s NRE Account. In fact, the intent of the Reserve Bank
of India appears to be to provide full convertibility of deposit schemes
for non-resident Indians and for rationalising the then existing non-
resident deposit schemes. Therefore, the judgment in Rayala
Corporation (P) Ltd. (supra) can have no application to the facts of
the present case.
27. Now proceeding further to the submission of the learned
counsel for the appellant(s) that, in any case, the order confiscating the
amount lying to the credit of the accounts of the appellant(s) is
without any reason and, therefore, liable to be set aside, we find merit
in the same. Section 13(2) of FEMA, which authorises the
Adjudicating Authority to order confiscation, reads as under:
"13. Penalties.--(2) Any Adjudicating
Authority adjudging any contravention under
sub-section (1), may, if he thinks fit in addition
to any penalty which he may impose for such
contravention direct that any currency,
security or any other money or property in
respect of which the contravention has taken
place shall be confiscated to the Central
Government and further direct that the foreign
exchange holdings, if any, of the persons
committing the contraventions or any part
thereof, shall be brought back into India or
shall be retained outside India in accordance
with the directions made in this behalf.
Explanation.--For the purposes of this
sub-section, "property" in respect of which
contravention has taken place, shall include--
(a) deposits in a bank, where the said
property is converted into such deposits;
(b) Indian currency, where the said
property is converted into that currency; and
(c) any other property which has
resulted out of the conversion of that
property."
28. A reading of the above provision would show that the
confiscation in addition to the penalty can be imposed under Section
13(1) of FEMA and may be ordered by the Adjudicating Authority "if
he thinks fit". The Adjudicating Authority is exercising a quasi-
judicial function and therefore, is bound to give reasons for the
exercise of the discretion vested in it under Section 13(2) of FEMA.
The Adjudicating Authority has, therefore, to conclude, by giving
reasons for the same, as to why, in the given facts, imposition of a
penalty alone will not suffice and in addition to the penalty, the
property deserves to be confiscated.
29. In the present case, neither the Adjudicating Authority nor the
learned Appellate Tribunal has given any reasons for directing
confiscation of the property, that is, the amounts lying to the credit of
the appellant(s) in their accounts. It may be noted here that the
impugned order of the Adjudicating Authority records that as far as
the loan transaction is concerned, the same stood repaid through the
maturity amounts of the NRNR accounts of the appellants. Therefore,
there was no loss of foreign exchange. In any case, these factors have
not been considered either by the Adjudicating Authority or by the
learned Appellate Tribunal. The orders, as far as confiscation is
concerned, is non-speaking and without any reason. The impugned
orders, therefore, as far as they permit confiscation of the amounts to
the credit of the appellants in their NRNR accounts, cannot be
sustained.
30. One option available to us would have been to remand the
matter back to the Adjudicating Authority for giving reasons for
confiscation of the amounts, however, given the fact that the
proceedings were initiated with show cause notices dating back to the
year 2008, resulting in the orders of the Adjudicating Authority in the
year 2010, and the impugned order of the learned Appellate Tribunal
in 2012, and much time having passed, we find that no fruitful
purpose shall be served by remanding the matter back for a fresh
consideration on the above aspect. Instead, on the facts, we find that
there is no warrant for confiscating the amounts lying to the credit of
the appellant(s) in their NRNR accounts, especially where the loan
transactions stood settled on the maturity of the NRNR Accounts that
they held with the previous banks/Authorised Dealers.
31. We, therefore, hold that while there is no warrant to interfere
with the orders imposing penalty on the appellant(s), the impugned
orders of the Adjudicating Authority, as upheld by the learned
Appellate Tribunal, directing the confiscation of the amounts lying to
the credit to the NRNR accounts of the appellant(s), cannot be
sustained and are hereby set aside.
32. The appeals are partially allowed in the above terms.
33. The parties shall bear their own costs.
NAVIN CHAWLA, J.
RAVINDER DUDEJA, J.
APRIL 8, 2026/ns/as
