PURUSHAINDRA KUMAR KAURAV, J. (ORAL)
1. The petitioners seek to challenge the order dated 01.07.2025 passed
by the Appellate Tribunal, Smugglers and Foreign Exchange Manipulators
(Forfeiture of Property) Act, 1976 ("SAFEMA"), whereby the applications
filed by the petitioners for waiver of pre-deposit of penalty amounts have
been partly allowed.
2. For the sake of clarity, the name of the petitioner(s), penalty imposed,
contravention amount and pre-deposit amount required to be deposited by
the petitioners, as per Impugned Order, is extracted as under:
6. The petitioners submit that they are the victims of fraud committed by
Ms. V. Sundari of M/s Agna X-Port, Ramesh Kataria and Sunil Garg. They
also submit that no action has been taken against said persons, who were
MANU/DE/1266/2009, LPA 203/2009.
MANU/DE/1235/2009, LPA 157/2009.
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instrumental in commission of the said contravention. Additionally, the
petitioners submit that they do not have sufficient financial resources to
adhere to the directions for pre-deposit of the amount as is imposed in the
Impugned Order.
7. Mr. Vivek Gurnani, learned counsel appearing on behalf of the
respondent-Enforcement of Directorate („ED‟) strongly opposes the
submissions made on behalf of the petitioners. He submits that if the
Impugned Order is perused carefully, the same would clearly justify the
imposition of 10% penalty amount. He also submits that the Appellate
Authority has already bestowed its due consideration in requiring the
petitioners to deposit only the 10% of the penalty amount imposed on them
by the Adjudicating Authority.
8. Additionally, Mr. Gurnani brings to the notice of the Court paragraph
no. 5.8 of the order dated 20.02.2020 passed by the Adjudicating Authority,
which reads as under:-
"5.8 With regard to the contention of the noticees - 2, 3 and 4 that, they
had been engaged in normal, commercial activity of bill discounting
through proper banking channel within India which is not a violation
under FEMA, I find from the voluntary statement dated 10.11.2017 of
Shri Pankaj Gupta, on behalf of noticees - 2, 3 and 4 given before the
Assistant Director of Enforcement, wherein he, inter alia, stated that one
Shri Sunil Garg from Delhi was importing goods from China and
intended to send advance remittances for the said imports; that on his
(Sunil Garg) request he (Noticce-2) opened a bank account in the name
of his firm and he further requested Noticee - 3 and Noticee - 4 to open
bank accounts in their respective firm names for remitting amounts
abroad; that he would be paid a commission of 20 paise per Rs. 1000
and he accepted the offer as he was financial difficulties. Noticee-2, vide
the said statement further stated that all these three noticees (Noticee-2,
3 & 4) had given signed blank cheques, signed RTGS forms and
credentials to a person named as Shri Sunil Garg in order to make the
Signed By:NEHA CHOPRA Signed
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said remittances. Noticee-2 is clearly aware that the said transactions
were for outward remittances in the guise of imports and had accepted
the offer of Shri Sunil Garg for a commission. It is thus evident that the
said noticees are aware that the said transactions are towards outward
remittances and they had given signed blank cheques to a person named
as Shri Sunil Garg for the same, as evident from their voluntary
statement and now the contention of the noticees that the said
transactions are part of bill discounting business is self-contradicting.
Further, Noticees - 2, 3 and 4 had not furnished any details of the buyer
and the seller and the invoices pertaining to them and even they had not
disclosed the commission they earned out of the said bill discounting
business. Further, the noticees had not disclosed any details/
whereabouts of the so called Shri Sunil Garg.
Whether he is a real person or fictitious person is also not known.
Accordingly, I find that it is an afterthought and they are using the term
Bill Discounting to escape from the clutches of the law."
9. Section 19 of the FEMA Act reads as under:
"19. Appeal to Appellate Tribunal
(1) Save as provided in sub-section (2), the Central Government or any
person aggrieved by an order made by an Adjudicating Authority, other
than those referred to in sub-section (1) of section 17, or the Special
Director (Appeals), may prefer an appeal to the Appellate Tribunal:
Provided that any person appealing against the order of the Adjudicating
Authority or the Special Director (Appeals) levying any penalty, shall while
filing the appeal, deposit the amount of such penalty with such authority as
may be notified by the Central Government:
Provided further that where in any particular case, the Appellate Tribunal
is of the opinion that the deposit of such penalty would cause undue
hardship to such person, the Appellate Tribunal may dispense with such
deposit subject to such conditions as it may deem fit to impose so as to
safeguard the realisation of penalty."
10. A bare perusal of the aforenoted provision would reveal that pre-
deposit of the entire penalty amount is the rule and the relaxation of the
deposit requirement can only be made by the Appellate Tribunal in "any
particular case", upon being satisfied of undue hardship being caused, and
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"subject to such conditions as it may deem fit to impose".
11. In the instant case, the Appellate Tribunal after considering the
entirety of the facts and circumstances, decided to exercise its discretion
provided for under the second proviso to Section 19. In doing so, the terms
to which it subjected the petitioners was--a deposit of 10% of the penalty
amount. It is, therefore, the case that the powers vested with the authority
were exercised by it, and upon a satisfaction of "undue hardship being
reached", conditions that it deemed fit were imposed.
12. The present petition, in exclusion to claims such as non-performance
or dereliction of statutory duty, can only assail the terms i.e., 10% of penalty
amount being required to be pre-deposited (or in other words, 90% and not a
100% waiver of pre-deposit of penalty amount being given), before this
Court. Qua this aspect, two considerations may be borne in mind.
13. First, qua the claim of the petitioners that they have a clear prima
facie case in their favour, it may be noted that the provisions of FEMA,
including Sections 3(b) and 10(6) read with Regulation 6(1) of the Foreign
Exchange Management (Realisation, Repatriation and Surrender of Foreign
Exchange) Regulations, 2000, may get attracted once the petitioner knowing
well that the amount, with which is it is dealing, is being remitted abroad,
continues to engage in a offending transaction.
14. When the petitioners were contacted by one Mr. Sunil Garg, they
were very well knew, as per their own statements, of the fact that the amount
will be remitted abroad, and necessary permissions in relation thereto ought
to have been obtained. The aforesaid is also finding recorded in paragraph
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no.5.8 of the order dated 20.02.2020 passed by the Adjudicating Authority.
15. Second, qua the claim pertaining to hardship. It be noted that the
Appellate Tribunal, by weighing and bestowing due consideration to the
facts, granted a 90% waiver of the penalty-amount. There is nothing on
record, that would allow this Court to arrive at the conclusion that the
direction in the Impugned Order is perverse, unreasonable, or owing to non-
application of mind. While it needs no repetition, it may briefly be stated
that the scope of scrutiny under Article 227 of the Constitution is narrow.
The High Court under this jurisdiction does not act as a Court of Appeal,
and cannot step into the shoes of the specialised tribunal/authority to
displace the findings rendered by it.
16. The decision of this Court in Nimesh Suchde (supra) would have no
application as, in that case the Appellate Authority has dismissed in toto the
application of the petitioner therein, for a waiver of pre-deposit of penalty
amount. Further, in the said case, the original order passed by Adjudicating
Authority, was found to be prima facie unsustainable by this Court.
Similarly, the decision in Priya Shah (supra) was also rendered on
completely different facts. The judgments relied upon by the petitioners
would, thus, not have any application.
17. Having considered the overall facts and circumstances, the Court
finds that there is no infirmity in the impugned order, however, in the
interest of justice, the direction of pre-deposit of 10% of the penalty amount
is modified to the extent of 5%. With respect to the remaining 5% of the
penalty amount, the petitioners will have to either produce the bank
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guarantee or to furnish a surety of the said amount to the satisfaction of the
Appellate Tribunal.
18. With the aforesaid directions and modification, the instant petitions
stand disposed of along with all pending applications.
19. It is, however, clarified that the merits of the findings of the
Adjudicating Authority, and the reasons for assailing them, will be subject to
the adjudication of the Appellate Tribunal.
20. Nothing stated hereinabove shall however amount to any expressions
on the merits of the case. The Court has only dealt with the argument made
by the parties qua the Impugned Order.
PURUSHAINDRA KUMAR KAURAV, J
MARCH 23, 2026
Nc
Signed By:NEHA CHOPRA Signed
Signing Date:28.03.2026 By:PURUSHAINDRA
14:15:13
KUMAR KAURAV
