UNION OF INDIA Vs. ABN AMRO BANK

JUDGEMENT

(1.) The Enforcement Directorate through Union of India has filed this appeal under Section 54 of the Foreign Exchange Regulation Act, 1973 read with 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.