JVL AGRO INDUSTRIES LTD. Vs. UNION OF INDIA

JUDGEMENT

(1.) In these proceedings, the petitioner has called into question the legality of an order dated 23 December 2013 passed by the Chief General Manager of the Reserve Bank of India on an application moved by the petitioner under Section 15 of the Foreign Exchange Management Act, 1999 (FEMA) for compounding a contravention. By the order impugned, the application for compounding of an admitted contravention of the Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004 (2004 Regulations) was allowed subject to the payment of an amount of Rs.57.74 lac which was to be deposited with the Reserve Bank within fifteen days. An application filed by the petitioner for review of the order has been dismissed on 23 January 2014 on the ground that there is no such power that vests in the Reserve Bank. Finally, the petitioner has called into question a summons which has been issued by the Assistant Director in the Directorate of Enforcement on 22 May 2014 and an order of the Reserve Bank dated 9 April 2014 requiring the petitioner to approach the Reserve Bank for prior approval for any ODI transactions in respect of its wholly owned subsidiary in Singapore.

(2.) In 2007, the petitioner incorporated a wholly owned subsidiary in Singapore. The subject matter of the contraventions which took place, consists of two remittances. The first remittance of USD 15,000/- took place on 14 August 2007 which was reported to the Reserve Bank on 9 March 2012. The second remittance of USD 5,00,000/- took place on 16 August 2007 which was reported to the Reserve Bank after a delay of over four and a half years on 9 March 2012. The petitioner also issued on 30 December 2011 a corporate guarantee of USD 10 million (equivalent to Rs.53.01 crore), which was reported to the Reserve Bank on 28 September 2013. The wholly owned subsidiary of the petitioner was allotted a Unique Identification Number (UIN) on 8 February 2013. When the first and the second remittances were made, admittedly the petitioner had not obtained a UIN. Moreover, the petitioner did not submit Annual Performance Reports for 2008 to 2010 within the prescribed period. These reports were submitted on 14 June 2013, on-line, with a delay between three and five years.

(3.) On 10 April 2012, a letter was addressed by the Reserve Bank to the petitioner following the submission of ODI forms on 9 March 2012 through the authorised dealer, Punjab National Bank. By its letter, the Reserve Bank informed the petitioner that it appeared that there was a violation of the 2004 Regulations notified on 7 July 2004. The violation, as stated in the letter, was that the petitioner had effected a remittance on 14 August 2007 for USD 15,000/- towards equity and a remittance of USD 5,00,000/- on 16 August 2007 which had been reported to the Reserve Bank after an inordinate delay, on 9 March 2012. The petitioner was, therefore, called upon to furnish the reason for reporting the transactions after a lapse of four years. The petitioner was, however, informed that it had an option of moving the Reserve Bank for compounding the contraventions in terms of the prevailing guidelines.