Full Judgment Text
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ LPA 157/2009 & CM Nos. 5272 & 5274 of 2009
PRIYA SHAH ..... Appellant
Through: Mr. R.K. Handoo and
Mr. Manish Shukla, Advocates.
versus
ENFORCEMENT DIRECTORATE NEW DELHI ..... Respondent
Through: Mr. Vineet Malhotra, Advocate.
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE NEERAJ KISHAN KAUL
O R D E R
% 25.05.2009
1. The appellant (original petitioner in the writ petition) in the
th
present appeal is aggrieved by the impugned order dated 10
February, 2009, whereby the learned single Judge has only partially
waived the amount that the appellant was required to deposit
towards pre-deposit for his appeal to be heard.
2. The allegations of the respondent Enforcement Directorate were
that the appellant was guilty of contravention of Foreign Exchange
Regulation Act, 1973 (hereinafter referred to as „FERA‟), particularly
Section 8 (1). Apparently her father, Late Satnam Shah opened
accounts in Swiss Banks as also in the Midland Bank, (later „HSBC‟),
in the U.K. According to the Enforcement Department, the appellant
was the joint holder of one account and also was under a duty upon
the death of her father in terms of Section 8 (1) of FERA to repatriate
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the funds in the account to India through banking channels. The
adjudicating authority had imposed a penalty of Rs.2.75 crores
stating that the appellant had not complied with the duty cast on her
to follow the procedure prescribed by FERA and the concerned
notifications issued in that regard.
3. The appellant had urged before the Appellate Tribunal that the
amount directed to be paid as pre-deposit would result in undue
hardship since the appellant had a very meager source of income.
The appellant had also relied on her income-tax returns for the said
purpose. It is the contention of the appellant that she had made out
a case for undue hardship to be entitled to the relief under proviso to
Section 19 sub-clause (1) of the Foreign Exchange Management Act,
1999 (hereinafter referred to as „FEMA‟).
4. To be entitled to the benefit of the proviso to Section 19(1) of
FEMA, the applicant must make out a case that the deposit of the
penalty would cause undue hardship to such person and in such
circumstances, the Appellate Tribunal may dispense with such
deposit subject to special conditions as it may deem fit to impose so
as to safeguard the realization of penalty.
5. The Supreme Court in Monotash Saha vs. Special Director,
Enforcement Directorate, 2008 (12) SCC 359 , observed that
“undue hardship” is a matter within the special knowledge of the
applicant for waiver and has to be established by him. A mere
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assertion about undue hardship would not be sufficient. "Undue"
means something which is not merited by the conduct of the
claimant, or is very much disproportionate to it. “Undue hardship” is
caused when the hardship is not warranted by the circumstances.
For a hardship to be “undue”, it must be shown that the particular
burden to observe or perform the requirement is out of proportion to
the nature of the requirement itself, and the benefit which the
applicant would derive from compliance with it. The word "undue"
adds something more than just hardship. It means an excessive
hardship or a hardship greater than the circumstances warrant.
6. In the present case, no material has been produced or brought
to our notice to establish that the appellant actually operated the
account in question. In fact, the adjudicating authority in its order
th
dated 7 July, 2008, in para-49 observed as follows:-
“49. All considered, I find that the charges of
contravention of Section 8(1), 14 and 19(1)(e) of
the FERA attributed against the noticee are on
sound footing and supported by the facts and
evidences like documents received from HSBC
Bank (Formerly, Midland Bank Ltd.), St.
Clements Danes branch, London and Credit
Suisse bank, Geneva. Before the death of her
father, the noticee was co-owner of the assets.
However, after the death of her father Shri
Satnam Shah on 6.12.2000, in her capacity as
beneficiary to the foreign currency accounts and
authorized person in respect of the shares
held/owned by her father, she became absolute
owner of the funds lying to the credit of those
accounts and the shares held by her father. The
fact that Ms. Priya Shah was a co-signatory to
the bank accounts and also documents in
respect of holding the shares and was
beneficiary to the said assets are proved by
records and admitted by her in her statement.
When the noticee was cited as beneficiary to the
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accounts and the shares in the banks‟ records, I
find that the question as to whether Shri
Satnam Shah had left any „will‟ indicating as to
whom the assets owned by him would be given
after his death is not relevant at all. Had the
noticee produced any such ‘will’ showing that
the funds lying in the subject bank accounts
and the shares are assigned to another
person, no doubt, the story would have been
different. Having not produced any such
document, the absolute ownership of the
funds and the shares had passed on to Ms.
Priya Shah, noticee after 6.12.2000, the date
of death of her father. I, therefore, find that
the charges of contravention of Sections 8(1),
14 and 19(1)(e) of the FERA, 1973 attributed
against the noticee in the SCN under
consideration had been proved. After
becoming owner of the funds and securities on
death of Shri Satnam Shah (her father), she was
under a legal obligation to close the foreign
currency accounts and bring the funds lying in
the credit of those accounts to India through
banking channels. Another course of action
could have been to declare the accounts to the
RBI and act according to the directions given by
the RBI. Similar is the case with the shares
also. She should have taken necessary
permission from the RBI for holding such shares
after becoming owner thereof or she should have
disposed of the shares and repatriated the
proceeds to India through banking channels.
Having failed to accomplish any of the legal
requirements, the charges of contravention of
Sections 14 and 19(1)(e) of the FERA, 1973
attributed against her stood proved.”
(emphasis supplied )
7. Thus, even as per the adjudicating authority, had the appellant
produced any will showing that the funds lying in the said bank
accounts and shares were assigned to another person, the story
would have been different. In view of this finding and the fact that no
material has been placed before us to establish that the appellant
had actually operated or was operating the account, we are of the
opinion that this is a fit case for waiver of deposit of penalty as a pre-
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condition for hearing the appeal under Section 19 sub-clause (1) of
FEMA.
8. As held by the Delhi High Court in Ess Ess Metals
Enterprises vs. CEGAT, 2003 (158) ELT 810 , that while
considering an application for dispensing with the deposit, the
appellate authority is not required to embark upon detailed enquiry
to find out whether the stand of the appellant is on a strong footing
or not. What is required to be considered at that juncture is as to
whether the appellant has made out a prima facie case in his favor;
the balance of convenience qua the deposit or otherwise lies in whose
favor and whether the deposit of the duty demanded is likely to cause
undue hardship to the appellant.
9. In the present case, the amount in the said bank accounts also
stands frozen. Further no material has been placed before us to
show that the appellant had actually operated the said account. In
fact, as per the adjudicating authority itself had the appellant
succeeded in showing that there was a will in existence as per which
the funds in the accounts had been assigned to another person, the
story would have been different. In view of this, we are of the view
that the appellant has succeeded in making out a prima facie case in
its favour and the balance of convenience qua the deposit lies in the
appellant‟s favour and insistence on the deposit of the same at this
stage would cause undue hardship to the appellant. Accordingly, we
th
set aside the order of the Appellate Tribunal dated 7 November,
LPA No.157/2009 Page No. 5 of 6
th
2008 and the impugned order of the learned single Judge dated 10
February, 2009 and grant waiver of pre-deposit of penalty amount as
a pre-condition for hearing of the appeal of the appellant under
Section 19(1) of FEMA. The matter is accordingly remanded back to
the Appellate Tribunal for Foreign Exchange for adjudication of the
appeal filed by the appellant under Section 19 sub-clause (1) of
FEMA without insistence on deposit of penalty under Section 19(1) of
FEMA. The appeal is accordingly allowed. It is ordered accordingly.
All pending application stand disposed of as well. Any observation
made by us in this order will not be taken as an expression of our
view on the merits of the matter.
CHIEF JUSTICE
NEERAJ KISHAN KAUL, J.
MAY 25, 2009
sb
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