G.C. Mishra, Actg. Chairman

FPA-FE-604/CHN/2003, FPA-FE-603/CHN/2003, FPA-FE-657/CHN/2003 & FPA-FE-555/CHN/2003

1. The afore named appellants filed separate appeals against the common order passed by the Special Director of Enforcement Directorate on 30.09.2003 in File No. T-4/7-M/2000 & T-4/22-M/2002 vide Order No. SDE(SSB/IV/36-40/2003). All these appeals are interconnected and revolve around common facts, therefore, this common order has been passed while dealing each appeal separately.

2. It is seen from the record that the Special Director issued five Show Cause Notices (SCNs) against these appellants and against Shri V.P. Gopalakrishnan Nair. The appeal filed by Shri V.P. Gopalakrishnan Nair has been dismissed on 09.01.2019 by the Division Bench. The SCNs were issued to all these appellants and Shri V.P. Gopalakrishnan Nair vide Memorandum dated 27.04.2000 by the Special Director for violation of Sections 18(2) & 18(3) and Section 18(2) & 18(3) of the Foreign Exchange Regulation Act (FERA), 1973 respectively read with relevant Central Government Notifications and proceeded against for adjudication. As per the allegations, the appellants and the deceased appellant have violated various provisions of FERA, 1973 as explained in the relevant Show Cause Notices.

(i) Memorandum bearing No. T-4/7-M/2000/SCN-I & SCN-II dated 27.04.2000 issued to M/s. Trend Setters Instyle India Ltd. & M/s. Mode Creazone India Pvt. Ltd. respectively for contravention of Sections 18(2) read with Central Government Notifications F. No. 1/67/EC/73-1 & 2 both dated 01.01.1974 and Section 18(3) of FERA, 1973 for failure to realise export proceeds in respect of 51 GR forms and in respect of 21 GR forms involving US $ 7,45,333.95 & US $ 3,97,366,51 respectively.

(ii) Memorandum bearing No. T-4/7-M/2000/SCN-III dated 27.04.2000 issued to M/s. Trend Setters Instyle India Ltd. for contravention of Sections 8(3) and 8(4) of FERA, 1973 read with Para 7A-20 of the Exchange Control Manual-Vol. I, 1993 Edition (of the Reserve Bank of India) for failure to submit evidence of actual import of goods against remittance of US $ 2,51,371.81.

(iii) Memorandum bearing No. T-4/7-M/2000/SCN-IV dated 27.04.2000 issued to M/s. Trend Designs Ltd. for contravention of Sections 8(3) and 8(4) of FERA, 1973 read with Para 7A-20 of the Exchange Control Manual-Vol. I, 1993 Edition (of the Reserve Bank of India) for failure to submit evidence of actual import of goods against remittance of US $ 5,659.

(iv) Memorandum bearing No. T-4/22-M/2002 dated 30.05.2002 (hereinafter referred to as 'SCN-V') issued to M/s. Intimate Apparels (P) Ltd. for contravention of Sections 18(2) read with Central Government Notification F. No. 1/67/EC/71-1 & 3 both dated 01.01.1974 and Section 18(3) of FERA, 1973 for failure to realise export proceeds in respect of 47 GR forms involving US $ 4,69,930.58.

3. The aforesaid appellants being Directors/functionaries in the said companies ('Trend Setters Group', for short) were charged for the aforesaid violations for the provisions of FERA, 1973 in terms of Section 68 of the said Act.

4. The facts as it appeared from the records are that on the basis of information received vide letter dated 30.07.1996 from the RBI, Kochi that, M/s. Trend Setters Instyle India Ltd. & M/s. Mode Creazone India Pvt. Ltd. carrying on business from the Cochin Export Processing Zone (CEPZ), had failed to realise substantial export proceeds and that the goods exported to buyers in U.S.A. & Canada were rejected due to poor quality and diverted to M/s. Trend Setters, Ajman and M/s. FSC Co. Ltd., Hong Kong without the RBI's approval and that the companies did not vigorously follow up the realizations and that the exporter's applications for set off/write off of unrealised export bills against unpaid import bills were pending. The RBI subsequently informed that, during 1995-97, the two companies and also M/s. Trend Designs Ltd. from the 'Trend Setters Group' made certain remittances to Hong Kong, Korea and UAE for import of fabrics/accessories for which Bills of Entry evidencing actual import of the materials were not submitted to the authorised dealers, the Enforcement Directorate initiated enquiries and that during the course of investigation, statement of Shri V. Gopalakrishnan Nair, the then Director of the M/s. Trend Setters Companies was recorded on 22.10.1996 and the statements of Shri K. Balachandran, General Manager (Commercial) were recorded on 22.03.1999 & 05.05.1999 and later statement of Shri S. Sunil Kumar, Chief Executive Officer of the companies was recorded on 01.12.1999.

5. On the basis of materials available, replies filed by the appellants and after hearing the parties, the Adjudicating Authority i.e. the Special Director, Enforcement Directorate came to the following findings which are reproduced below:

"31. Keeping in view the submissions and records discussed hereinbefore, the factual position remains uncontroverted that the export proceeds amounting to US $ 7,45,333.95 (SCN-I), US $ 3,97,366.51 (SCN-II) and US $ 4,69,930.58 (SCN-V) are pending realisation for which the noticees could not adduce an iota of evidence to demonstrate any steps having been taken for realizing the same. Filing of applications, way back in 1999, before the RBI, who also have not accepted the same, cannot be a tenable explanation for failure to take any steps for recovery. I am not prepared to give credence to the set-off proposals claimed to have been filed before the RBI. Accordingly, I am convinced that this is a classic case where the noticees have deliberately and consciously refrained from making any well-meaning or serious effort whatsoever for realisation of export proceeds. Thus, the noticees having contravened the statutory provisions, both in letter as well as spirit, deserve to be visited with commensurate penal consequences.

32. With regard to the charges in SCN-III, vide reply dated 01.06.2000, the noticees stated that Bills of Entry were submitted to the authorised dealer though delayed. Copies of the said Bills of Entry were also furnished. However, on examination of the said copies, I find that the material particulars in the same do not tally with those in the import documents. As such, I am not inclined to accept these contentions.

33. In respect of SCN-IV, the noticees' submissions veer around short shipments and consequent, excess payments to the overseas party, viz. M/s. Wide Way Textiles Ltd., Hong Kong to the extent of US $ 5,659/-. In my view, the point for consideration is not whether the noticees received less or full quantity of goods but as to what steps the noticee company took for obtaining refund of the excess remittance. As on this component, the law is clear and envisages that when a remittance is made, the imported goods should be of the specified quality, quantity and invoice value. It may be observed that if the noticees claim is that lesser quantity of goods was received, the responsibility for recovery of over payment so made will have to be squarely borne by the noticee. The admitted position being that the notice has failed to retrieve back the excess payment, the contravention is complete with the noticee becoming liable for penal action.

34. All considered, I find that the charges against the noticee companies as spelt out in all the five SCNs under consideration stand established for the reasons detailed hereinbefore. Further, the charges against the individual noticees charged for the violation in terms of Section 68 of the FERA, 1973 are also held as proved."

THE PENALTIES IMPOSED BY THE ADJUDICATING AUTHORITY:

6. In view of above findings, various penalties were imposed as per the different SCNs issued on the companies as well as on the individual appellants.

7. The total penalties imposed on the companies and appellants for the violations of the aforesaid provisions of law are as below:-

8. Being aggrieved with the aforesaid findings the appellants have filed the present appeals on following facts and grounds:

9. It is revealed from the record that the Trend Setters Group of Companies were engaged in business from Cochin Export Processing Zone as 100% export-oriented units since 1989 and were exporting readymade garments to U.S.A., Canada, U.A.E., Hong Kong, etc. and that they were procuring raw materials within India and also importing fabrics/accessories from Korea, Hong Kong and U.A.E. and that appellant Shri Sebastian Chokkattu, an NRI, was the Chairman & Director of the said Group of Companies, based in Ajman, U.A.E., where he was also carrying on business in the name and style of M/s. Trend Setters, Ajman and that appellant Shri Biju Thomas was another NRI, Director in the companies and that had factories in Sri Lanka & Ajman and Offices in Hong Kong & Taiwan and that the day-to-day business affairs of the companies were looked after by Shri V.P. Gopalakrishnan Nair, one of the Directors, till 1997 and by Shri Sunil Kumar, Chief Executive Officer, from January, 1998 onwards and that the companies had bank accounts in Indian Bank, Shanmugam Road, Kochi and State Bank of Travancore, Overseas Branch, Kochi and that M/s. Trend Setters Instyle India Ltd. and M/s. Mode Creazone India Pvt. Ltd. could not realise substantial portion of their export proceeds to the tune of US $ 7,45,333.95 and US $ 3,97,366.51 and that the reasons for such huge outstanding were attributed to the buyers raising quality claims and refusing to take delivery of consignments due to delay in shipments and that during 1997 and 1999-2000, the companies faced large-scale labour unrest, consequent lock-outs and finally winding up proceedings and that during the labour strike/lock outs etc, the companies could not execute orders in time and further quality suffered as well and that the noticee companies were importing fabrics/accessories from Korea, Hong Kong, U.A.E. etc, and a number of import bills remained unpaid due to acute financial crises faced by the Group and because of lock-outs and closure of factories & production and that the total amount of foreign exchange due for remittance exceeded the proceeds pending realisation and that the proposals were submitted by the companies to the RBI in 1999 to allow set off of the amounts pending realisation against the payable amounts for imports and that the said proposal was pending for decision with the RBI.

10. In respect of remittances by M/s. Trend Setters Instyle India Ltd., M/s. Trend Designs Ltd., and M/s. Mode Creazone India Ltd. against which the said companies had failed to submit Bills of Entry as evident for actual import of the goods and investigations revealed that the companies had been importing fabrics/accessories from Korea, Hong Kong and U.A.E. and that Bills of Entry (B/E for short) in respect of remittances of Rs. 5,84,106/- and Rs. 5,77,830/- on 08.08.1997 and 03.07.1997 by M/s. Trend Designs Ltd. were already submitted to the authorised dealer for submission of the same to the RBI and in respect of remittance of Rs. 16,59,044/- on 02.01.1997 by M/s. Mode Creazone India Ltd., the relevant B/E was submitted to the RBI and that in regard to remittance of Rs. 6,467/- on 10.11.1995 against import of price tickets (labels), the material was received by courier and the concerned postal-wrapper, to be submitted as proof of import, could not be traced.

11. It was also found that M/s. Trend Designs Ltd. did not submit B/E in respect of remittance of US $ 5659/- to M/s. Wide Way Textiles Ltd., Hong Kong against Invoice No. 99009 E dated 09.04.1996 for import of fabrics. In this regard, Shri Balachandran, General Manager (Commercial) stated that the company had placed order for 112 rolls of corduroy from the Hong Kong company under Letter of Credit and the material after clearance was found to contain only 71 rolls, i.e. short supply of 41 rolls for value of US $ 5,659/- and that short shipment was recorded in the Madras Customs' records as well as the records of CEPZ, Customs, Kochi and that when the buyer was requested to reimburse the amount (the full amount was already received by M/s. Wide Way Textiles Ltd., as the import was on L/C basis), it claimed that full quantity of shipment was effected by them and that, if any shortage is found, the claim should be lodged with the shipping company; and the company did not take any further steps in this direction.

12. It was further observed that M/s. Trend Setters Instyle India Ltd. remitted US $ 98,652.20 & US $ 1,52,719.56 (Invoice Nos. TSLD/96/121 dated 11.06.1996 & TSDL/96/119A dated 08.06.1996) to M/s. Trend Setters Ltd., Ajman, in which company, Shri Sebastian Chokkattu, Chairman of the Group was already having 49% stake in the holdings and the company failed to submit relevant B/Es to the authorised dealer/RBI.

13. Vide letter dated 09.11.2001, the RBI further informed that another company of this Group, M/s. Intimate Apparels (P) Ltd., had also failed to realize substantial export proceeds consequent upon which, vide letter dated 17.10.2001, the RBI caution-listed the company. An amount of US $ 4,69,930.58 attributable to exports by this company was stated to be pending. In its letter, the RBI mentioned that the Trend Setters Group of Companies have closed business and, on orders of the Deputy Development Commissioner, CEPZ, the premises were vacated.

14. It is also revealed from the record that M/s. Trend Setters Instyle India Ltd., M/s. Mode Creazone India Ltd. & M/s. Intimate Apparels (P) Ltd. contravened the provisions of Section 18(2) & 18(3) of the FERA, 1973 read with Notifications related thereto and further that M/s. Trend Setters Instyle Ltd. & M/s. Trend Designs Ltd., contravened the provisions of Sections 8(3) & 8(4) of FERA, 1973 read with Para 7A-20 of the Exchange Control Manual-Vol. I, 1993 Edition of the RBI.

WRITTEN SUBMISSIONS ON BEHALF OF SHRI SEBASTIAN CHOKKATTU (APPEAL NO. 604/2003) filed on 18.07.2018

1) The Appellant above named, being aggrieved by the findings and order passed by the Special Director of Enforcement, Directorate of Enforcement, New Delhi (Adjudicating Authority) thereby imposing personal penalties upon Appellant Rs. 15,00,000/- with regard to Memorandum SCN-I, Rs. 9,00,000/- with regard to Memorandum SCN-II, Rs. 6,00,000/- with regard to Memorandum SCN-III and Rs. 15,000/- with regard to Memorandum SCN-IV and T-4/22-M/2002/SCN V dated 30-05-2002 Rs. 12,00,000/- under Section 68 of FERA Act, 1973.

2) The Appellant herein was one of the Directors and Promoter of the Companies but was never involved in the day to day business affairs of the aforesaid Companies as was based abroad and had appointed Shri. V.P. Gopalakrishnan Nair, as full time Managing Director till 1998 who was assisted by Professional functional Managers to assist him.

3) That the Appellant herein who was the promoter of Trend Setters Group is an NRI based in Hong Kong, where he is also carrying on business in the name of M/s. Trend Setters Ltd, Ajman. Shri Biju Thomas is another NRI Director in the Companies. The Group Companies was having factories in Sri Lanka & Ajman and offices in Hong Kong & Taiwan. The day-to-day business affairs of the Companies were looked after by Shri V.P. Gopalakrishnan Nair who was the Managing Director & CEO (Indian Operations), till end of 1997 and thereafter by Shri Sunil Kumar, Chief Executive Officer, from 1st January, 1998 onwards.

4) That during the years 1997 and 1999-2000 the Appellant Companies faced large-scale labour unrest, consequent lock outs due to which the Appellant Companies failed to execute export orders in time and further the output and quality of the products also suffered a setback. Similarly the Companies suffered huge setbacks at various period of time since inception due to strike in Cochin Port, strike resorted by Trailors, Lorries, other general strikes including regional and state wide Bundhs etc. That the Appellant Companies were importing fabrics/accessories from Korea, Hong Kong, U.A.E. etc. and this resulted in delayed delivery of import consignments and resultant delay in export shipments which also ended up in order cancellations, huge claims for delayed delivery/non delivery, air freight expenses etc which all adversely affected the Companies financial position. A number of import bills remained unpaid due to acute financial crisis faced by the Group due to the above said reasons. From this itself it can be seen that the problems were caused absolutely due to reasons beyond the control of the Management. The Hon'ble Supreme Court of India in D. Govind Ram Vs. Shamji. K & Company AIR 1961-SC 1285 at Para 17) has held that the expression "force majeure" is not a meager French version of the Latin expression "Vis Major". It is undoubtedly a term of wider import. Difficulties have arisen in the past as to what could legitimately be included in "Force Majeure". Judges have agreed that Strike, Break down of Machineries which normally not included in 'Vis Major' are included in 'Force Majeure'. An analysis of this ruling on the subject into which it is not necessary in this case to go shows that were reference is made to 'Force majeure' the intention is to save the performing party from the consequences of anything over which he has no control.

5) The workers of the companies started agitation in October, 2000 demanding wage increase and other benefits and as the demanding were exorbitantly high, Management was not in a position to accept their demands, which resulted in strike and consequent lockouts. This scenario resulted in huge financial losses to the group due to non-fulfillment of export orders. Similar Strike for same reason had taken place in 1995 and 1997 respectively which had inflicted heavy loss to the Companies and in 1997, two of the Companies were destroyed in a big fire that had lasted for more than four hours when the Companies were under lock out.

6) Given the nature of export business in which the group is involved there are bound to be left over, rejects, seconds etc. and the Group Companies in India took the help of associate companies to market the rejected/cancelled goods due to delay, quality complaints etc. with regard to the products from time to time. Disposal of such rejected goods which bear registered label of the buyers is not a normal commercial transaction. Stock buyers for rejected garments are not readily available in India.

7) The assistance of Dubai Associates were taken for the disposal of the seconds generated by rejections, delays etc. Our associate companies have agreed to help us by sending raw materials without payment. Such unpaid imports exceed the unpaid exports. We have requested Reserve Bank of India for a set off of unpaid exports against unpaid imports.

8) That the total amount of foreign exchange due for remittance exceeded the proceeds pending realisation and the proposals were submitted by the Group to the R.B.I. in 1999 to allow set off of the amounts pending realisation against the payable amounts for imports and the said proposal was pending for decision with the R.B.I.

9) It is in fact the appellant who had sustained huge financial loss personally being the principal promoter of the companies. The Appellant had brought in Rs. 5.8 Crores towards promoter contribution, the investment of which was on fully repatriable basis and till date he had not at all availed the benefit and the same also was lost. In addition by sending raw materials on credit which was never repaid by the Companies also amount to Rs. 12 Crores. Because of this development the appellant herein was forced to close down his business in Hong Kong and adversely affected his business in U.A.E.

10) The appellant submits that the import bills payable to his companies abroad will come to US $ 2385119.45 (IRS 11.98 Crores) whereas the export bills payable by his companies to the Trend Setters Group in Cochin comes to US $ 731135.85 (IRS 3.65 Crores). It is submitted that the Group companies in India took the help of associate companies abroad to market the rejected/cancelled goods due to delay, quality complaints etc with regard to the products and disposal of such rejected goods which bear registered label of the buyers is not a normal commercial transaction and at this stage the Associated companies abroad tried to dispose the said rejects/seconds which was not marketed successfully due to inferior quality of stock resulting in non-payments. But the associated companies abroad helped the Group companies in Cochin by sending raw materials and accessories.

11) Such unpaid imports exceed the unpaid exports as detailed above for which a request for set off of unpaid exports against unpaid imports is pending before the Reserve Bank of India. It is submitted that as per revised provisions in Exchange Control Manual, RBI can permit write off up to 10% of total export earnings for various purpose like payment of Commissions, Claims etc. It is submitted that the respondent had an apprehension that the export proceeds might have been realised by M/s. Trend Setters Ltd., Ajman. The appellant vehemently denies the allegation made by the authority below which was only a mere assumption without any bonafides. Not only that, the said apprehension is based on no material. It is clear from the records produced before the authority below that the noticees had been proceeding against the foreign buyers and it is the appellant who had sustained heavy financial loss which was supported with authenticated evidences such as certified statements issued by Authorised Dealer. The authority below miserably failed to appreciate this fact and proceeded against the appellant. Further, the appellant could have opted to buy foreign exchange at a higher rate for make import remittances, as there is no restrictions to make import payments. However, the appellant preferred to save the exchange rate and also want to save the bank charges and commissions for the Companies here which will be a substantial amount. Hence he preferred a setoff which was permitted in the past by RBI and permissible as per the existing provisions in the Exchange Control Manual. Had the appellant want to take money as alleged, he could have preferred to take it legally as Commissions and marketing expenses which is permissible as per ECM. The appellant herein submits that he had never preferred any such claims. It is also submitted that there is no Foreign Exchange Loss to the Country.

12) The appellant submits that the authority below ought to have found that the appellant is no way benefited by any of the contravention alleged in the SCN's. The authority below should have appreciated the fact that the appellant had never taken any effort to take away his import bills due to his companies or his investments made which were on fully repatriable basis. If he has done so he would have at least salvaged his overseas operations. But there is no such finding against the appellant in the impugned order. The authority below was not able to prove any such acts. This itself show the bonafideness on the part of the appellant who was also the promoter of the company. By not doing so the appellant had sustained very heavy business and financial loss which had adversely affected his business operations abroad and had put him in personal hardship there also.

13) The appellant submits that he is a Non Resident Indian and the day to day management and running of the affairs of the companies were looked after by a full time Managing Director and other functional Professional Managers in India till 1997. The appellant also submits that he was having other business interests abroad and was not able to concentrate much on the affairs of the companies in India where a full time Managing Director by name Shri V.P. Gopalakrishnan Nair is employed with full operational powers subject to the supervision of Board of Directors in which there were nominee Directors from various Financial Institutions.

14) It was the consistent case of the appellant all along that the export in question in respect of which non-realisation of export proceeds alleged took place during the period 1992 to 1997 under the direct control of full time Managing Director appointed exclusively to look after the day to day affairs of the Group companies in India, whereas the appellant is a Non Resident Indian based in Hong Kong and was engaged in other business including meeting buyers for procurement of orders for his companies in India as well as abroad and as part of that have to undertake extensive travel.

15) With reference to the proviso to sub-section (1) of Section 68 of Foreign Exchange Regulation Act, 1973 the appellant submitted that the contravention, if any, took place without his knowledge and that he exercised all due diligence and efforts to realise the export proceeds in respect of export made in previous periods and also directed the then Managing Director to take necessary steps to realize the bills due. Nowhere in the impugned order this aspect of the case has been considered by the authority below and his order proceeds on the premise as if the appellant was in charge of the affairs of the companies. It is settled law that when a contention is advanced before a quasi-judicial authority he is bound to consider the same and pass orders on merit. Nowhere in the order it is stated that the appellant was instrumental in causing any loss to the Government. Therefore the order passed against the appellant by the authority below is in gross violation of the principles of natural justice and therefore without jurisdiction.

16) The appellant submits that he had never instructed the companies in Cochin to honour the import bills due to his companies abroad towards the import and was always trying to help the companies in Cochin to tide over its financial problems. This clearly spells out the genuine and bonafide intention of the appellant. The appellant submits that he never had any malafide intention to take away the money due to him and hold the payments due to his companies in Cochin. There is no evidence on record to prove that the appellant was in any way benefited by any contravention of the provisions of the Foreign Exchange Regulations Act. No mens rea is established or even alleged against the appellant.

17) The appellant further submits that he had submitted adequate documentary evidence to Reserve Bank of India to prove that the appellant have to receive US $ 2385119.45 towards import bills for which the Reserve Bank of India have no objection to release the same at any time. But as there was export bills receivables to the group companies in Cochin the appellant had agreed for a set off with the entire export bills receivable against the import bills payable to the appellant by sustaining huge financial loss to him. In fact the appellant was advised by experts including RBI Officials to bring in foreign exchange towards export receivables and to take back the same against import payables and by repeating the same mode of transactions a few times the entire issues will be settled. However considering the cost involved and also the delay involved the appellant decided to absorb the losses himself and opted for a set off even though he suffer huge financial loss personally and submitted relevant documents to Reserve Bank of India so that unnecessary litigations can be avoided and the appellant can have peace of mind. The appellant submits that in the proposal submitted to RBI for set off and write off, there is no foreign exchange loss to the country and Reserve Bank of India, in the year 1996 has granted such a set off for one of the companies.

18) The Companies of which the appellant was the Director was wound up by the Hon'ble High Court of Kerala as per its order dated 20.03.2001 in C.P. Nos. 1, 4 and 5 of 1998. Under Section 446 of the Companies Act, 1956 a proceedings against a company under liquidation can be initiated or pursued only with the leave of the Company Court. This was specifically pointed out at the time of personal hearing to the respondent and the copy of the winding up order was submitted to him. In the impugned order he was completely feigned ignorance of the said facts and therefore the order passed is illegal.

19) It is also submitted that all alone the authority below has proceeded against the noticees including the appellant on the basis of mere surmises, presumptions and assumptions. For instance he has entered into an apprehension that the export proceeds might have been realised by M/s. Trend Setters Ltd., Ajman. The appellant vehemently denies the allegation made by the authority below which was only a mere assumption without any bonafideness. Not only that, the said apprehension is based on no material, it is clear from the records produced before the authority below that the noticees had been proceeding against the foreign buyers and it is the appellant who had sustained heavy financial loss which was supported with authenticated evidences. The authority below miserably failed to appreciate this fact and proceeded against the appellant.

20) The authority below has scornfully rejected the contention of the appellant that request for set off/write off was pending before the Reserve Bank of India stating that the application was submitted in 1999. The appellant produced documents to prove that the said application is under active consideration of the Reserve Bank of India even now and to substantiate the same the latest communications received by the appellant from the Reserve Bank of India were produced before the authority below. His unwarranted conclusion that the Reserve Bank of India will not accept the claim of the appellant is wholly unjustified.

21) It is relevant to mention that Ext. A1-which establishes that there is a precedent that RBI had allowed setoff in a case as per its order number EC.CHN.X. 1401.43.20.117/6-97 dated 17.01.1996 which is marked as Ext. Al in the present appeal. This itself establishes beyond doubt that there is provision for setoff and already there exists a precedent. Further It has to be noted that mutual consent for setoff was received from the companies/buyers concerned and copy of that was also submitted to RBI along with setoff proposal submitted along with all relevant documents which included Bill of Entries/Bill of Ladings, Statements, supporting documents all attested by Authorised Dealer (Bank)/Auditor as the case may be and forwarded by the Authorised Dealer to Bank which clearly establishes the authenticity of claim. There is no foreign exchange loss to the country, as the import payable is much higher than the export receivables. Hence application for setoff against import payables can very well be allowed based on the precedent set. RBI had referred the matter to Enforcement Directorate without disposing the setoff request which were actively under their consideration as evidenced by several communications to and from RBI. It is absolutely unjust. The non-realisation started due to various reasons including the outbreak of plague epidemic in the year 1994 and subsequently several labour unrests etc which is stated in detail above. Companies could have easily paid the import payables which were long pending but didn't do so as those funds were used for the expansion/sustenance of the companies in India.

22) That the impugned order is factually perverse and legally erroneous and therefore same is liable to be set aside in the facts and circumstances of the present case. It is in fact the appellant who had lost foreign exchange to the tune of IRS 17.8 Crores towards his investment as Promoters contribution and raw materials supplied by his overseas companies to the Companies here on credit basis to salvage this Companies crisis and even though the investment was fully repatriable and also on deferred payment basis and as there was no restrictions on the same, he never opted it and try to help the companies here which in turn had made only foreign exchange gain and not loss to the country. All the appellants claims were supported with documentary proof which was annexed with the original appeal and subsequent additional statements. All the issues mentioned above resulting in serious violation of Fundamental Rights of the petitioner. In the circumstances it is submitted that the SCN's itself will not stand against the appellant herein.

WRITTEN SUBMISSIONS ON BEHALF OF BALAKRISHNAN (APPEAL NO. 603/2203) filed on 18.07.2018

1) The appellant had filed appeal against the order No. SDE(SSB)/iv/36-40/2003 dated 30.09.2003 passed by the Special Director, Enforcement Directorate imposing a penalty of Rs. 3,00,000/- in the matter of non-realisation of export proceeds by the Company M/s. Intimate Apparels Pvt. Ltd. in which the appellant was Director from 11.01.1995 to 03.01.1998. The appellant was a Paid Executive and held directorship based on the direction from the Employer.

2) The Company had faced lot of labour problems in the year 1996 and in 1997 had been under lock out consequent to an illegal strike and company suffered huge loss and sustained damages due to an outbreak of fire accident while under lock out.

3) It is settled law that when contentions are advanced before a quasi-judicial authority he is bound to consider the same and pass orders on merit. Nowhere in the order it is stated that the appellant was instrumental in causing any loss to the Government. Therefore the order passed against the appellant by the authority below is in gross violation of the principles of natural justice and therefore without jurisdiction.

4) The respondent ought to have found that the appellant was only a Paid Employee of the Companies of which in Intimate Apparels Pvt. Ltd. he was the Alternate Director and there is no evidence on record to prove that he was in any way benefited by any contravention of the provisions of the Foreign Exchange Regulations Act. No mens rea is established or even alleged against the appellant.

5) As far as the appellant is concerned there is no lethargy or inaction on his part. While in office he was taken all prudent steps to realize the amount due. He left service in the year 1998 and thereafter he had no knowledge about the said affairs of the company. All the issues mentioned above resulting in serious violation of Fundamental Rights of the petitioner.

WRITTEN SUBMISSIONS ON BEHALF OF SHRI BIJU THOMAS (APPEAL NO. 657/2203) filed on 18.07.2018

1) The Appellant above named, being aggrieved by the findings and order passed by the Special Director of Enforcement, Directorate of Enforcement, New Delhi thereby imposing personal penalties upon Appellant Rs. 5,00,000/- with regard to Memorandum SCN-I, Rs. 3,00,000/- with regard to Memorandum SCN-II, Rs. 2,00,000/- with regard to Memorandum SCN-III and Rs. 5,000/- with regard to Memorandum SCN-IV under Section 68 of FERA, 1973. Being aggrieved thereby, the Appellant had filed the Memorandum of Appeal No. 555/2003 which is now pending before the Hon'ble Tribunal.

2) The appellant was never involved in the day-to-day matters of these companies even though he was Director as he was stationed in Dubai, UAE and was looking after the Marketing Activities of the Company.

3) He is not at all responsible for the contraventions if any as he is no way connected with those affairs.

4) It was the consistent case of the appellant all along that the export in question in respect of which non-realisation of export proceeds alleged took place during the period 1992 to 1997 whereas the appellant became Director of the Companies only after 01.01.1997.

5) With reference to the proviso to sub-section (1) of Section 68 of Foreign Exchange Regulation Act, 1973 the appellant submitted that the contravention, if any, took place without his knowledge.

6) It is settled law that when contentions are advanced before a quasi-judicial authority he is bound to consider the same and pass orders on merit. Nowhere in the order it is stated that the appellant was instrumental in causing any loss to the Government. Therefore the order passed against the appellant by the authority below is in gross violation of the principles of natural justice and therefore without jurisdiction. All the issues mentioned above resulting in serious violation of Fundamental Rights of the petitioner.

WRITTEN SUBMISSIONS ON BEHALF OF SUNIL KUMAR S. (APPEAL NO. 555/2003) filed on 18.07.2018

1) The Appellant above named, being aggrieved by the findings and order passed by the Special Director of Enforcement, Directorate of Enforcement, New Delhi thereby imposing personal penalties upon Appellant Rs. 5,00,000/- with regard to Memorandum SCN-I, Rs. 3,00,000/- with regard to Memorandum SCN-II, Rs. 2,00,000/- with regard to Memorandum SCN-III and Rs. 5,000/- with regard to Memorandum SCN-IV under Section 68 of FERA Act, 1973. Being aggrieved thereby, the Appellant had filed the Memorandum of Appeal No. 555/2003 which is now pending before the Hon'ble Tribunal.

2) It was the consistent case of the appellant all along that the export in question in respect of which non-realisation of export proceeds alleged took place during the period 1992 to 1997 whereas the appellant took charge as Chief Executive Officer of the Companies only on 01.01.1998. With reference to the proviso to sub-section (1) of Section 68 of Foreign Exchange Regulation Act, 1973 the appellant submitted that the contravention, if any, took place without his knowledge and that he exercised all due diligence after taking over charge on 01.01.1998 to realise the export proceeds in respect of export made in previous periods. Nowhere in the impugned order this aspect of the case has been considered by the authority below and his order proceeds on the premise as if the appellant was in charge of the affairs of the companies all along 1992 to 1997. There is no personal allegation against the appellant that he had done anything illegal or benefitted out of it.

3) It is settled law that when contentions are advanced before a quasi-judicial authority he is bound to consider the same and pass orders on merit. Nowhere in the order it is stated that the appellant was instrumental in causing any loss to the Government. Therefore the order passed against the appellant by the authority below is in gross violation of the principles of natural justice and therefore without jurisdiction.

4) The respondent ought to have found that the appellant was only a Paid Employee of the Companies of which he was the Chief Executive Officer and there is no evidence on record to prove that he was in any way benefitted by any contravention of the provisions of the Foreign Exchange Regulations Act. No mens rea is established or even alleged against the appellant.

5) In fact it is the appellant who had taken all possible steps to recover the amounts by taking various actions like instituting legal proceedings/Suits, seeking the assistance of Commercial Attache in the Indian Embassy, USA, approved the RBI for relief as provided in the Exchange Control Manual, traced out the misplaced documents like Bill of Entry, Shipping Bills, etc. ever since he assumed charge as CEO on 01.01.1998. This fact was not at all appreciated by the Respondent.

6) The Companies of which the appellant was the Chief Executive Officer was wound up by the Hon'ble High Court of Kerala as per its order dated 20.03.2001 in C.P. Nos. 1, 4 and 5 of 1998. Under Section 446 of the Companies Act, 1956 any proceedings against a company under liquidation can be initiated or pursued only with the leave of the Company Court. This was specifically pointed out at the time of personal hearing to the respondent and the copy of the winding up order was submitted to him. In the impugned order he was completely feigned ignorance of the said facts and therefore the order passed is illegal.

7) As far as the appellant is concerned there was no lethargy or inaction on his part. It was his consistent case that he was in no way involved in the non-realization of export bills in question because those bills related to the period 1992-1997 whereas he took charge as Chief Executive Officer of the companies only on 01.01.1998. After taking over charge he took all possible steps to realize the export proceeds pending realization in the previous years and had sent notices to the creditors, instituted legal proceedings wherever possible and sought the help of the Commercial Attache, Indian Embassy, Washington and the U.S. Ambassador to India, traced out the available documents and submitted to RBI etc. He also filed suit against M/s. K. Mart Corporation in the Sub-Court, Ernakulam. All these facts were submitted to the respondent in the statements filed, but he miserably failed to consider the contentions advanced by the appellant with a biased mind. 8) The appellant have no role in the entire matter as he was in no way involved in the non-realization of export bills in question because those bills related to the period 1992-1997 whereas he took charge as Chief Executive Officer of the companies only on 01.01.1998. The day-to-day business affairs of the Companies during the period 1991 to 1997 were looked after by Shri V.P. Gopalakrishnan Nair, Managing Director, from the year 1991 to 1997 during which the contraventions if any are alleged. There is no case that there is any non-realisation during the period in which the appellant was Chief Executive Officer, i.e. from 01.01.1998 to 24.10.2000. In fact it is the appellant who had taken all possible steps to recover the amounts by taking various actions like instituting legal proceedings/Suits, seeking the assistance of Commercial Attache in the Indian Embassy, USA, approached the RBI for relief as provided in the Exchange Control Manual, traced out the misplaced documents like Bill of Entry, Shipping Bills etc and submitted to RBI ever since he assumed charge as CEO on 01.01.1998. All the issues mentioned above resulting in serious violation of Fundamental Rights of the petitioner. This fact was not at all appreciated by the Respondent.

15. The appellants filed additional written submissions on dated 06.02.2020:

a) All investments by the petitioners are brought on repatriable basis.

b) The petitioners have taken up the matters related to non-payment with the party failing which legal actions were taken against them.

c) All packing credit bank facility were insured and premiums are paid against non-realization country risk and winding up.

d) Further investment is brought into the country without any money. foreign exchange outflow when the company faced acute financial problems.

e) The petitioners have asked RBI to set off against accounts receivable and RBI allowed in one company and other applications under consideration then only enforcement taken over the subject and the petitioners have well submit doc with evidence and proof.

f) There is no foreign exchange loss to the country. And by non-payment of promoter companies the country gain foreign exchange giving hard ship to his companies and subsequently closed.

g) All this happen due to illegal strikes and the petitioner have filed case against Kerala government.

h) RBI allows upto 5% of export turnover towards commission or other expenses which these companies are not taken. So allegations made are incorrect.

i) Important the M.D. at the time of the incidence passed away and some lawyers fighting the case Kerala government claims also passed away.

j) Current M.D. is facing brain tumors and Auto immune disorders and able to manage and as soon as these cases are over want to strike off these companies which no more in function otherwise.

16. The appellants in support of their contentions further filed additional short written submissions on 03.11.2020 which are reproduced hereinbelow;

1) The appellants received letters from RBI in July 2003 stating that they are not in a position to take decisions as the case is pending with Enforcement Directorate, New Delhi. It is clearly shows the appellants letter references numbers of applications are with them.

2) As per this letter the appellants have asked the appellants banks to resubmit application as per exim policy along with audited account/statements, consent from importers, and export bills for set off.

3) A copy of set off by RBI earlier to show that such set off can be allowed and as a matter to precedence the RBI have such powers to exercise in similar situations.

4) Detailed list of total export and payment received payments receivables and import payables total amount of $ 1764383.93 payables are much higher than export receivables and set off submitted with consent of parties. Audited statements and invoices and customs entry forms etc. Therefore, no foreign exchange loss is made to the country. It is also worth mention that all investments brought to the country in foreign exchange by Mr. Sebastian Chokkattu as NRI on repatriable basis and made a total loss. But country earned foreign exchange and over 5000 people got trained and reach high levels in life. Mr. Sebastian Chokkattu was having close to 5000 people working in Kerala now he is alone and with financial constraints, with serious medical problems and not in a position to hire people, that is why it took long time to get the documents in order.

17. In addition to aforesaid submissions the learned counsel for the appellants has filed additional clarifications on 06.11.2020 wherein he has referred to page no. 133, 261, 263, 191 of the correspondences filed along with the clarification application on write off/set off correspondence. He has also filed two judgments passed by Hon'ble Delhi High Court in the matter of "Kavita Dogra Versus Directorate of Enforcement" in CRL.A. 44 of 2008 and judgment passed by Hon'ble High Court of Bombay at Mumbai in the matter of "Shri M.M. Shah Versus The Deputy Director of Enforcement & Ors." in FEMA Appeal No. 01 of 2010, in support of his contentions that the Directors who are not incharge of and not responsible for the conduct of day-to-day business of the companies should not be held liable for contravention of any provisions of law by the Director who is responsible for the conduct of day-to-day business of the companies.

18. The Respondent has filed the written synopsis on dated 12.10.2020. In the said written synopsis they have reiterated the facts which were reflected in the impugned order and Show Cause Notices. In addition to above, they have referred to the orders passed in Writ Petitions filed before the Hon'ble High Court of Kerala bearing WP(C) No. 16446/2009 filed by Shri V.P. Gopalakrishnan Nair i.e. the deceased appellant, WP(C) No. 25536/2009 filed by Shri Sebastian Chokkattu, WP(C) No. 27244/2009 filed by Shri Biju Thomas, WP(C) No. 22304/2009 filed by Shri Sunil Kumar, WP(C) No. 6994/2010 filed by Shri Balakrishnan B., WP(C) 29496/2009 & WP(C) No. 10807/2018 filed by Shri Sunil Kumar.

19. It is contended by the respondent that in WP(C) No. 10807/2018 filed by Shri Sunil Kumar, the Hon'ble Kerala High Court vide judgment dated 20.09.2017.

i. W.P.(C) No. 16446/2009-Shri V.P. Gopalakrishnan Nair Vs. Special Director and others: This writ petition was disposed by the Hon'ble High Court vide Judgment dated 15-06-2009, directing the second respondent (the Hon'ble Appellate Tribunal for Foreign Exchange) to consider the appeal preferred by the petitioner in accordance with law and pass appropriate orders thereon, after giving an opportunity for hearing, as expeditiously as possible; Till further orders are passed on appeal all coercive proceedings for recovery of the penalty as taken against the petitioner, was to be kept in abeyance till final order was passed on the appeal filed before the Hon'ble Appellate Tribunal for Foreign Exchange.

ii. WP(C) No. 25536/2009-Shri Sebastian Chokkattu Vs. Special Director and others.

iii. WP(C) No. 27244/2009-Shri Biju Thomas Vs. Special Director and others.

iv. WP(C) No. 22304/2009-Shri Sunil Kumar Vs. Special Director and others, all the three writ petitions were disposed of by the Hon'ble High Court of Kerala by a common judgment dated 29.09.2009, directed the second respondent viz. the Hon'ble Appellate Tribunal for Foreign Exchange to consider and pass order of Appeals in all these three cases as early as possible, after affording opportunity for hearing to the petitioners, at any rate within a period of 2 months from the date of receipt of copy of the Judgment.

v. WP(C) No. 6994/2010-Shri Balakrishnan Vs. Special Director and others. Vide Judgment dated 05.03.2010, the Hon'ble Court applied ratio in Judgment in WP(C) No. 16446/2009; further directed to keep in abeyance recovery proceedings till disposal of the appeal by the Hon'ble Tribunal.

vi. WP(C) No. 29496/2009 and

vii. WP(C) No. 10807/2018-Shri Sunil Kumar Vs. Special Director and others. Vide judgment dated 20.09.2017 the Hon'ble High Court of Kerala ordered that the District Collector shall consider the petitioner's claim after notice to the petitioner and the first Respondent (the Special Director, Enforcement Directorate, New Delhi) within a period of three months; till such a decision is taken in this matter, the interim order passed in this matter will continue. As per the orders of the Hon'ble High Court of Kerala, hearing was posted before the Deputy Collector (Revenue Recovery), Kakkanad, Ernakulam, on 07.02.2008. After hearing the counsel for Shri Sunil Kumar and Deputy Director of Enforcement who were present before the Deputy Collector, vide order dated 02.03.2018, the Deputy Collector (R.R.) decided that Rs. 10,05,000/- due from the petitioner is liable to be recovered from him. Against this order, the petitioner has filed W.P.(C) No. 10807/2018 before the Hon'ble High Court of Kerala, with prayer to stay all further proceedings of revenue recovery. The said writ petition is pending.

20. Heard both sides and perused the materials available on record. From the facts as revealed from the record it appears that the Trend Setters Group of Companies namely M/s. Trend Setters Instyle India Ltd., M/s. Mode Creazone India Pvt. Ltd., M/s. Trend Designs Ltd. & M/s. Intimate Apparels (P) Ltd. were carrying on business from the Cochin Export Processing Zone as 100% export oriented units and that the group commenced business in 1990 with M/s. Trend Setters Instyle India Ltd. and were exporting readymade garments to USA, Canada, UAE, Hong Kong, etc. The raw materials for the production of garments were procured from Punjab, Surat, etc., and also imports fabrics/accessories from Korea, Hong Kong and U.A.E. It is the contention of the appellants that the appellant Shri Sebastian Chokkattu, Trend Setters Group was an NRI, based in Ajman, UAE from where he was also carrying on business in the name of M/s. Trend Setters Ltd., Ajman and that the other appellant Shri Biju Thomas is the another NRI Director in the companies and that the group was having factories in Sri Lanka & Ajman and offices in Hong Kong & Taiwan and that the day-to-day business affairs of the companies were stated to be looked after by Shri V.P. Gopalakrishnan Nair, Managing Director till 1997 and by Shri Sunil Kumar, Chief Executive Director from January 1998 onwards and that the companies have bank accounts in Indian Bank, Shanmugam Road, Kochi and State Bank of Travancore, Overseas Branch, Kochi.

21. It is an admitted fact that the period involved in the present proceedings is from 1992 to 1997. It is also admitted fact that during this period M/s. Trend Setters Instyle India Pvt. Ltd. and M/s. Mode Creazone India Ltd. exported goods to different countries such as USA, Canada, Hong Kong, etc. but could not realise substantial portion of their export proceeds to the tune of US $ 7,45,333.95 & US $ 3,97,366.51 and US $ 4,69,930.58 stated to be due to quality claims raised by the buyers and their refusals to take delivery of consignments due to delay in shipments. It is also pleaded by the appellants in their appeals that during the period 1997 and 1999-2000, the appellants companies faced large scale labour unrest, consequent lock outs due to which the appellants companies failed to execute export orders in time and further output and quality of the products also suffered setback and that the importing fabrics/accessories from Korea, Hong Kong, U.A.E., etc, and number of import bills remained unpaid due to acute financial crises faced by the group. In addition to the above grounds for non-realisation of export proceeds and non-payment of import bills. It is also contended by the appellants that the Trend Setters Group of Companies faced acute financial problems due to orders cancellations and subsequent huge claims preferred by the buyers due to non-performance of export orders consequent to the outbreak of plague epidemic and resultant embargo imposed by USA and other European countries against Indian goods and foreign ships avoiding Indian Ports and these being situations beyond the control of these companies, the financial position of the companies was completed jeopardised with the result that they could not settle their import bills and at the same time failed to realise export proceeds.

22. From the aforesaid it is very clear that the Trend Setters Group of Companies had made export of readymade garments and imported fabrics/accessories to and from foreign countries stated above respectively. It is also clear and undisputed fact that the Trend Setters Group of Companies have failed to realise the substantial proportion of export proceeds as stated above and also failed to make payments of imported goods bills made during the 1992 to 1997. From the records it appears that the Trend Setters Group of Companies had requested the RBI to write off/set off the export proceeds against the amount to be paid towards the goods imported from the foreign countries.

23. During the course of arguments a specific question was put to the learned counsel for the appellants whether the RBI has passed any order writing off of the export proceeds and/or setting off the import bills with export proceeds. The answer of the learned counsel was in negative. No documents have been placed on record showing that the RBI has written off or setting off the export proceeds/import bills except one letter of RBI dated 17.09.1996 in which the Reserve Bank of India, Exchange Control Department sent a letter to the Assistant General Manager, State Bank of Travancore, Overseas Branch, Kochi, regarding follow up of export outstanding M/s. Trend Designs Ltd. in the said letter dated 17.09.1996 the approval of RBI was conveyed for realizing the 22 GR Forms/11 import invoices totaling US $ 1.25 Lakhs adjusting the existing dues against each other and allowing a write off of US $ 22,365.77 in respect of pending export bills. This approval appears to have been a conditional one as it is conveyed in the same letter that "Please, however, note that the write off has been allowed subject surrender of proportionate export benefits, if any avail by the company". This conditional write off/set off approval of RBI letter dated 17.09.1996 does not relate to the realisation of export proceeds in the present matter as is evident from the pleadings in Para No. 12 of all the appeal memos. There is nothing on record that the aforesaid condition has been complied with. The appellants have also filed several other correspondences between the companies with RBI and vice-versa, the companies with their banks and vice-versa and between the banks and the RBI. These documents are examined and I do not find anything therein that is required to be answered to the questions involved herein. These correspondences except one or two are of the period of 2003-04. The appellants have also filed the Certificate of the Chartered Accountant. I have examined the same which is also not relevant for the purpose of the present appeals regarding the diversion of exported goods, non-realisation of export proceeds, non-clearance of imported bills and write off/set off, etc. These documents only shows that the appellants had made certain correspondences with RBI for write off/set off of export proceeds/import bills respectively.

24. On the basis of facts alleged above, five Show Cause Notices were issued to the aforesaid appellants including Shri V.P. Gopalakrishnan Nair, since deceased on the facts and grounds stated in each of the SCNs, therefore, the same are not repeated here.

25. The contraventions alleged against the appellants are under Sections 18(2) read with Central Govt. Notification F. No. 1/67/EC/73-1 & 3 both dated 01.01.1974 and Section 18(3) of the FERA, 1973 and Sections 8(3) & 8(4) of the FERA, 1973 read with Section 68 of the said Act.

26. The provisions allegedly contravened are as below:

"Sections in the Foreign Exchange Regulation Act, 1973

Section 8. Restrictions on dealing in foreign exchange.--

(3) Where any foreign exchange is acquired by any person, other than an authorised dealer or a money-changer, for any particular purpose, or where any person has been permitted conditionally to acquire foreign exchange, the said person shall not use the foreign exchange so acquired otherwise than for that purpose or, as the case may be, fail to comply with any condition to which the permission granted to him is subject, and where any foreign exchange so acquired cannot be so used or the conditions cannot be complied with the said person shall, within a period of thirty days from the date on which he comes to know that such foreign exchange cannot be so used or the conditions cannot be complied with, sell the foreign exchange to an authorised dealer or to a money-changer.

(4) For the avoidance of doubt, it is hereby declared that where a person acquires foreign exchange for sending or bringing into India any goods but sends or brings no such goods or does not send or bring goods of a value representing the foreign exchange acquired, within a reasonable time or sends or brings any goods of a kind, quality or quantity different from that specified by him at the time of acquisition of the foreign exchange, such person shall, unless the contrary is proved, be presumed not to have been able to use the foreign exchange for the purpose for which he acquired it or, as the case may be, to have used the foreign exchange so acquired otherwise than for the purposes for which it was acquired.

Section 18. Payment for exported goods.--

(2) Where any export of goods, to which a notification under clause (a) of sub-section (1) applies, has been made, no person shall, except with the permission of the Reserve Bank, do or refrain from doing anything, or take or refrain from taking any action, which has the effect of securing--

(A) in a case falling under sub-clause (i) or sub-clause (ii) of clause (a) of sub-section (1),--

(a) that payment for the goods--

(i) is made otherwise than in the prescribed manner, or (ii) is delayed beyond the period prescribed under clause (a) of sub-section (1), or

(b) that the proceeds of sale of the goods exported do not represent the full export value of the goods subject to such deductions, if any, as may be allowed by the Reserve Bank; and

(B) in a case falling under sub-clause (ii) of clause (a) of sub-section (1), also that the sale of the goods is delayed to an extent which is unreasonable having regard to the ordinary course of trade: Provided that no proceedings in respect of any contravention of the provisions of this sub-section shall be instituted unless the prescribed period has expired and payment for the goods representing the full export value has not been made in the prescribed manner within the prescribed period.

Provided that no proceedings in respect of any contravention of the provisions of this sub-section shall be instituted unless the prescribed period has expired and payment for the goods representing the full export value has not been made in the prescribed manner within the prescribed period.

(3) Where in relation to any goods to which a notification under clause (a) of sub-section (1) applies the prescribed period has expired and payment therefor has not been made as aforesaid, it shall be presumed, unless the contrary is proved by the person who has sold or is entitled to sell the goods or to procure the sale thereof, that such person has not taken all reasonable steps to receive or recover the payment for the goods as aforesaid and he shall accordingly be presumed to have contravened the provisions of sub-section (2).

Section 68. Offences by companies.--

(1) Where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder is a company, every person who, at the time of the contravention was committed, was in charge of, and was responsible to, the company for the conduct of business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention.

(2) Notwithstanding anything contained in sub-section (1), where a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly.

Explanation.--For the purposes of this section--

(i) "company" means anybody corporate and includes a firm or other association of individuals; and

(ii) "director", in relation to a firm, means a partner in the firm."

27. It is also alleged that the Trend Setters Group of Companies and the appellants have failed to comply with the conditions subject to which the foreign exchange was released to M/s. Trend Designs Ltd. There is violation of Para 7A-20 of the Exchange Control Manual of the Reserve Bank of India, 1993 Edition, Vol. I. which provides as under:-

(i) It is obligatory on the part of importers to submit Exchange Control copies of Bills of Entry/Postal/Courier Wrapper to the authorised dealer through whom relative remittance was made as evidence that the relative goods for which the payment was made have actually been imported into India. Authorised dealers should ensure that these are submitted in all cases including cases of advance remittances permitted vide paragraph 7A. 10, by their importer-customers and are verified. (ii) Authorised dealers should in all cases acknowledge receipt of Exchange Control copy of bills of entry/postal/courier wrappers from importers by issuing acknowledgment slips containing the following particulars:-

(a) Importer's full name and address with code number.

(b) Import licence number and date (wherever applicable).

(c) Bank's reference of letter of credit number etc.

(d) Number and date of Exchange Control copy of bill of entry/postal wrapper and the amount of import.

(e) Particulars of goods imported.

(iii) Internal inspectors or auditors (including external auditors appointed by authorised dealers) should carry out 100% verification of all the Exchange Control copies of bills of entry/postal/courier wrappers and a certificate to that effect should be forwarded on half-yearly basis, to the office of Reserve Bank under whose jurisdiction the authorised dealer is situated.

(iv) In case an importer does not furnish the Exchange Control copy of Bill of Entry within three months from the date of remittance (or within prescribed period as provided in paragraph 7A. 10), the authorised dealer should issue a reminder to the importer asking him to produce it forthwith. If there is still no response, a reminder by registered post with acknowledgment due should be issued not later than one month from the date of the first reminder.

(v) Authorised dealers should forward to Reserve Bank a statement as at the end of each calendar quarter in form BEF furnishing details of import transactions in respect of which the importers have defaulted in submission of Exchange Control copies of Bills of Entry within a period of 21 days from the date of issue of registered (acknowledgment due) reminder. The quarterly statement should be submitted to Reserve Bank within 15 days from the end of the quarter to which the statement relates.

28. In respect of remittances, these Trend Setters Group of Companies had failed to submit Bill of Entry as evidence for actual import of the goods. Rather as revealed from the investigations, the Companies had been importing fabrics/accessories from Korea, Hong Kong & U.A.E. and that Bills of Entry in respect of remittances of Rs. 5,84,106/-& Rs. 5,77,830/- on 08.08.1997 & 03.07.1997 respectively by Trend Designs Ltd. were already submitted to the authorised dealer for submission of the same to the RBI, and in respect of remittances of Rs. 16,59,044/- on 02.11.1997 by M/s. Mode Creazone India Ltd., the relevant Bill of entry was submitted to the RBI and that in regard to remittance of Rs. 6,467/- on 10.11.1995 against import of price tickets (labels), the material was received by Courier and the concerned Postal-Wrapper, to be submitted as proof of import, could not be traced.

29. It is also seen from the record that M/s. Trend Designs Ltd. did not submit B/E in respect of remittance of US $ 5,659/- to M/s. Wide Way Textiles Ltd., Hong Kong against Invoice No. 99009 E dated 09.04.1996 for import of fabrics. In this regard, Shri M. Balachandran, General Manager (Commercial) stated that the company had placed order for 112 rolls of corduroy from the Hong Kong company under Letter of Credit and the material after clearance was found to contain only 71 rolls, i.e. short supply of 41 rolls for value of US $ 5,659/- and that short shipment was recorded in the Madras Customs' records as well as the records of CEPZ, Customs, Kochi and that when the buyer was requested to reimburse the amount (the full amount was already received by M/s. Wide Way Textiles Ltd. as the import was on L/C basis), it claimed that full quantity of shipment was effected by them and that, if any shortage is found, the claim should be lodged with the shipping company; and that the company did not take any further steps in this direction.

30. From the aforesaid facts it is established that the Trend Setters Group of Companies did not realised the substantial portion of export proceeds and it is also established that except filing a Suit before a Sub-Court in Ernakulam, Kerala and writing to the RBI for write off/set off, no other steps have been taken. In other words, no sufficient and visible efforts have been by/on behalf of the Trend Setters Group of Companies to realise the export proceeds.

31. Now the question is who was/were the person/persons responsible for the diversion of export goods/non-realisation of export proceeds and remittances of payment towards import of goods. Admittedly the period of contraventions was from 1992 to 1997. It has come from the statement of aforesaid appellants that Shri V.P. Gopalakrishnan Nair was the Managing Director of the Trend Setters Group, who was looking after the day-to-day business affairs of the companies and responsible for the conduct of the business. The Adjudicating Authority has imposed total penalty of Rs. 14,05,000/- on Shri V.P. Gopalkrishnan Nair, who had challenged the imposition of aforesaid penalty before this Tribunal vide appeal no. FPA-FE-602/CHN/2003 and it is revealed from the record that during the pendency of his appeal it was informed by his counsel Shri Dev Prakash on 03.08.2017 that he has expired on 09.12.2015 by way of filing of Death Certificate. On 18.01.2018 the said learned counsel for the appellant submitted before this Tribunal that the appeal against Shri V.P. Gopalkrishnan Nair may be allowed to be abated as legal representatives are not coming forward for substitution of the deceased appellant. The said appeal has been dismissed for default on 09.01.2019 by the Division Bench of this Tribunal.

32. The Adjudicating Authority has imposed penalties of Rs. 35,00,000/- on M/s. Trend Setters Instyle Pvt. Ltd., Rs. 15,00,000/- on M/s. Mode Creazone India Pvt. Ltd., Rs. 25,000/- on M/s. Trend Designs Ltd. and Rs. 20,00,000/- on M/s. Intimate Apparels (P) Ltd.

SHRI SEBASTIAN CHOKKATTU (APPEAL NO. 604/CHN/2003)

33. The appellant Shri Sebastian Chokkattu was the Chairman of the Trend Setters Group of Companies and was overall in-charge of the same. It has also come on record that he was also a Director of the said group of companies. The Adjudicating Authority has imposed a total penalty of Rs. 42,15,000/- on Shri Sebastian Chokkattu. There is nothing on record that he has taken any sufficient steps/action to realise the export proceeds and that on the grounds stated in the Show Cause Notices and the reasons cited in the impugned order it is clear that exports were made and diverted. The non-realisation of export proceeds cannot be said to be beyond the control. The facts are different in the present as such the judgment in D. Govind Ram case (supra) is not applicable as there is no 'force majeure' in the present case. Mere pendency of the application for set off/write off does not absolve the responsibility of the appellants. On the given facts and circumstances of the case, I do not find any infirmity or illegality in the impugned order passed by the Adjudicating Authority. Considering the amount involved in the contraventions, it is held that the amount of penalties imposed on Shri Sebastian Chokkattu, on the basis of individual Show Cause Notices wherein contraventions has been described in details, are proper and proportionate. Hence no interference in the findings arrived at by the Adjudicating Authority, in respect of Shri Sebastian Chokkattu, is called for.

SHRI B. BALAKRISHNAN (APPEAL NO. 603/CHN/2003)

34. The appellant Shri B. Balakrishnan was appointed as the Director of M/s. Intimate Apparels Pvt. Ltd. on 11.07.1995. It is seen from Copy of Form No. 32 presented before the Registrar of Company on 14.08.1995 that Shri Sebastian Chokkattu presented the said form incorporating therein that Shri V.P. Gopalakrishnan Nair has resigned from the Directorship of the company from 11.07.1995 and Shri B. Balakrishnan appointed on the same date. From the above it appears that Shri B. Balakrishnan became the Director of M/s. Intimate Apparels (P) Ltd. on resignation of Shri V.P. Gopalakrishnan Nair. It has come on record that Shri V.P. Gopalakrishnan Nair was looking after the day-to-day affairs of the company and he was the Director of this company till 11.07.1995 and thereafter Shri B. Balakrishnan became the Director from 11.07.1995 to 1997 by stepping in the shoe of Shri V.P. Gopalakrishnan Nair and thus was in-charge of and responsible to the said company for the conduct of the business of the company at the time when the aforesaid exports were made. Therefore, there is no illegality in the impugned order in holding Shri B. Balakrishnan as one of the contravener as alleged and the impugned order does not call for any interference as the penalty of Rs. 4,00,000/- imposed on him is just, proper and proportionate.

SHRI BIJU THOMAS (APPEAL NO. 657/CHN/2003)

35. It is pleaded by Shri Biju Thomas that he was an NRI Director of the said group of companies based in Ajman, U.A.E. The Adjudicating Authority has imposed a total penalty of Rs. 10,05,000/- on Shri Biju Thomas. It is also pleaded by Shri Biju Thomas, the appellant that he was no way involved in the non-realisation of export bills in question because he was an NRI and was based at U.A.E. and was not directly involved in the day-to-day affairs of the Trend Setters Group of Companies and those non-realised bills related to the period 1992-1997 there was a full time Director in-charge of Indian Operations to look after the affairs of those group of companies and he was informed that they had taken all possible steps to realise the export proceeds pending realisation in the previous years and had sent notices to the creditors, instituted legal proceedings wherever possible and sought the help of the Commercial Attache, Indian Embassy, Washington and the U.S. Ambassador to India and has also filed suit against M/s. K. Mart Corporation in the Sub-Court, Ernakulam.

36. On perusal of the records made available in the appeal, there is nothing on record to show that the appellants including Shri Biju Thomas or the Trend Setters Group of Companies have approached the Commercial Attache, Indian Embassy, Washington and the U.S. Ambassador to India for realisation of export proceeds. During the course of hearing the learned counsel for the appellants did not place any evidence in this regard. So, the contention raised in the appeals regarding the steps taken to realise the export proceeds cannot be believed.

37. However, there is nothing on record placed by the respondent nor there is anything in the impugned order and the SCNs that the appellant Shri Biju Thomas was looking after the day-to-day affairs of the Trend Setters Group of Companies. In the light of the same, the provision of Section 68(2) of FERA, 1973 is not attracted. My conclusion is supported by the Judgment of Hon'ble High Court Delhi in the matter of CRL.A. 44 of 2008 passed in the matter of "Kavita Dogra Versus Director of Enforcement, Enforcement Directorate" and Judgment passed by Hon'ble High Court of Bombay in FEMA Appeal No. 1 of 2010 in the matter of "M.M. Shah Versus Deputy Director, Enforcement Directorate & Ors.", relied on & filed by the appellants, consequently, Shri Biju Thomas cannot be held liable for contraventions of Sections 8(3) & 8(4) of FERA, 1973 read with Paragraph 7A-20 of RBI Exchange Control Manual Vol-I,1993 Edition, Sections 18(2) & 18(3) read with Section 68 of FERA, 1973, the Central Government Notifications dated 01.01.1974. In view of the above, the findings of the Adjudicating Authority holding Shri Biju Thomas liable for the aforesaid contraventions and imposition of penalties are erroneous and not legal, hence, quashed and set aside.

SHRI S. SUNIL KUMAR (APPEAL NO. 555/CHN/2003)

38. Shri S. Sunil Kumar, the appellant has been found charged under SCNs I-IV and found guilty by the Adjudicating Authority and a total sum of Rs. 10,05,000/- have been imposed as penalty on him for contraventions under Sections 8(3) & 8(4), Sections 18(2) & 18(3) read with Section 68(2) of FERA, 1973, the Central Government Notifications dated 01.01.1974 and Paragraph 7A-20 of RBI Exchange Control Manual Vol-I, 1993 Edition.

39. It has come on record that Shri S. Sunil Kumar, appellant has joined the Trend Setters Group of Companies as Chief Executive Director only in the year 1998. There is nothing on record that this appellant was working in any other capacity in the said Group of Companies. Admittedly, the period of contraventions is from 1992 to 1997. There is also nothing on record to substantiate that this appellant was in anyway concerned with day-to-day business affairs of the said Group of Companies during the period 1992-1997. Therefore, attributing any allegation against the appellant Shri S. Sunil Kumar for the contraventions which were committed prior to his joining the group of companies is unwarranted. The appellant has filed the judgments in the matters of Kavita Dogra (supra) & M.M. Shah (supra) that are also applicable in the present case. In view of the above, the appellant Shri S. Sunil Kumar cannot be held liable for contraventions of Sections 8(3) & 8(4) of FERA, 1973 read with Paragraph 7A-20 of RBI Exchange Control Manual Vol-I, 1993 Edition, Sections 18(2) & 18(3) read with Section 68 of FERA, 1973, the Central Government Notifications dated 01.01.1974. In view of the above, the findings of the Adjudicating Authority holding Shri S. Sunil Kumar liable for the aforesaid contraventions and imposition of penalties are erroneous in law and not legal, hence, quashed and set aside.

40. In the light of aforesaid discussions and findings it is ordered that:

(a) The appeal filed by Shri Sebastian Chokkattu is dismissed.

(b) The appeal filed by Shri B. Balakrishnan is dismissed.

(c) The appeal filed by Shri Biju Thomas is allowed.

(d) The appeal filed by Shri S. Sunil Kumar is allowed.

41. There is no order as to costs.

42. Accordingly the appeals are disposed of.