BEFORE THE APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE,

4TH FLOOR, LOK NAYAK BHAVAN, KHAN MARKET,

NEW DELHI-110003

FPA-FE-02/CHN/2020

IN THE MATTER OF:

Sh. Martin @ Santiago Martin ….Appellant
Vs.

Assistant Director,
Directorate of Enforcement ....Respondent

INDEX

S. PARTICULARS PAGE
NO. NO.
1. Reply on behalf of Respondent to Application filed 1- 13
by the Appellant u/s 19(1) of FEMA, 1999 seeking
dispensation with deposit of penalty amount
imposed vide order dated 28.11.2019 bearing no.
ADE/SRO/KCZO/18/2019 AND TO STAY OF ORDER
DATED 28.11.2019.

ON BEHALF OF

DIRECTORATE OF ENFORCEMENT,
GOVERNMENT OF INDIA

THROUGH

PANKAJ PANDEY
Advocate
OFF: A – 15, FIRST FLOOR
NIZAMUDDIN EAST
NEW DELHI-110013
Email: officeofpankajpandey@gmail.com
MOB: 9560031419
Dated: 15.04.2024
 1

BEFORE THE APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE,

4TH FLOOR, LOK NAYAK BHAVAN, KHAN MARKET,
NEW DELHI-110003

FPA-FE-02/CHN/2020

IN THE MATTER OF:

Sh. Martin @ Santiago Martin ….Appellant
Vs.

Assistant Director,
Directorate of Enforcement ....Respondent

REPLY ON BEHALF OF RESPONDENT TO APPLICATION FILED BY

THE APPELLANT U/S 19(1) OF FEMA, 1999 SEEKING
DISPENSATION WITH DEPOSIT OF PENALTY AMOUNT IMPOSED
VIDE ORDER DATED 28.11.2019 BEARING NO. ADE/SRO/
KCZO/18/2019 AND STAY OF IMPUGNED ORDER.

To,
THE HON’BLE CHAIRMAN,
APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE

MOST RESPECTFULLY SHOWETH:

1. It is respectfully submitted that the present Appeal along with an

application under Section 19(1) of FEMA, 1999 r/w Rule 10 of the
FEMA (Adjudication Proceedings and Appeal) Rules, 2000, seeking
dispensation of penalty amount and for a stay of the Adjudication
order (“Application”) has been filed by the Appellant challenging
Adjudication Order bearing No. ADE/SRO/KCZO/18/2019 dated
28.11.2019 (“impugned order”) passed by the Assistant Director,
Director of Enforcement, Chennai Zonal Office.

2. That the Respondent denies all the averments as made by the

Appellant either in the Application or in the accompanying Appeal as
referred to in the Application unless specifically admitted to
hereinafter. It is submitted that the facts leading up to the present
appeal are enumerated below in brief:
 2

3. That on the basis of specific information received by the Income tax

Department, Cochin a search was conducted on Shri Singaram
Muthuswamy Chettiar, Singaram Lotteries, Kochi which led to seizure
of some cash and jewellery, and the details of the search were
communicated to this directorate. Subsequently, a summons dated
12.5.2011 was issued to Shri. Singaram Muthuswamy Chettiar for
appearance on 31.5.2011 under Section 37 of FEMA,1999 read with
Section 131 of the Income Tax Act pursuant to which his statement
was recorded on 31.5.2011. In this statement, he, inter alia, deposed
that he is the proprietor of M. Singaram Lotteries Cochin, an agent of
M/s Megha distributors 15/650, Kunnathurmedu, Combatore Main
Road Palakkad engaged for selling lotteries including the lotteries of
Royal Government of Bhutan; that the proprietor of M/s Megha
distributors is one John Kennedy. Shri. Singaram added that he is
also a stockiest of M/s M.J. Associates Palakkad for selling various
lotteries. The partners of M/s M.J. Associates are S.Martin@ Santiago
Martin and Jayamurugan.

4. On further investigation summons was issued to S. Martin (appellant

herein) to appear on 18.2.2013,. Thereafter, next summon was issued
to S. Martin to appear on 18.7.2013 and his statement was recorded
on the same day. Further appellant vide his statement deposed that
he has been doing lottery business from 1991 onwards in the name of
"M/s Martin Lottery Agencies" and doing lottery wholesale business
throughout India. Further, he had done wholesale lottery business in
Kerala in the name "M/s. M.J.Associates". This was partnership
business with one Shri Jayamuragan as partner. The firm was
functioning from 31.12.2007 to August 2010, thereafter no business
was done in Kerala. In addition to lottery business, he had a real
estate, spinning mills, college of Homeopathy, Martin Productions
(Film Production), Wind Mills.
 3

5. It is submitted that the Reserve Bank of India has liberalised the

foreign exchange facilities available to residents by Circular No.64
RBI/2004/39 AP (DIR Series) dated 4.2.2004 called the Liberalised
Remittance Scheme (LRS). It is mentioned that, this facility is
available to all resident individuals and can remit up to USD 25,000/-
per calendar year for any purpose for which a scheme is formulated.
This scheme had commenced by setting a limit of USD 25,000/- later
on this was enhanced to USD 1,00,000/- vide RBI/2006-07/379
AP(DIR Series) Circular no.51 dated 8.5.2007thereafter to USD
2,00,000/ - vide RBI/2007-08/146 AP (DIR Series) Circular No.09
dated 26.9.2007, which continued till 14.8.2013 Notification No.
FEMA 165/2007-RB dated 10.10.2007 in Paragraph 2(a) of the said
Notification the amendment of Foreign Exchange Management
(Permissible Capital Account Transactions) (Amendment) Regulations,
2007 gives the amount permissible under capital Account transaction.
Appellant and his family members have shown in their application
form for LRS that the source of the fund as business profit, but from
their admissions in their statement before the Assistant Director,
Cochin that the amount for a remitting amount outside India under
the Liberalised Remittance Scheme in 2008, 2009 and 2010 belongs
to the appellant and not belonging to the persons seeking to make the
remittances. Therefore, it is evident that in the statutory declarations
filed for making the remittances under the Liberalised Remittance
Scheme, the appellant for and on behalf of his family members has
mis-reported and mis-declared the sources of funds.

6. That the appellant, a person resident in India, during the financial

years 2007-08, 2008-09, and 2009-10, through the declarations filed
by him with Citi Bank, Combatore had made remittances more than
the permissible limits under the LRS (as detailed @5.2 of Adjudication
Order) and accordingly appellant, had contravened the provisions of
Section 6(2)(b) of FEMA, 1999 read with Regulation 4(a) of Foreign
Exchange Management (Permissible Capital Account Transactions)
Regulations, 2000 and Section 4 of FEMA, 1999 to the extent of the
 4

excess remittances totalling US$ 2197560 (Equivalent to Rs.

10,24,74,924/-).

7. It is submitted that appellant being a person resident in India, during

the financial years 2007-08 and 2009-10 through excess LRS
Remittances had acquired immovable property in Dubai and London,
and accordingly contravened the provisions of Section 6(3)(h) of FEMA,
1999 read with Regulation 3 of the Foreign Exchange Management
(Acquisition and Transfer of Immovable Property Outside India)
Regulations, 2000 and Section 4 of FEMA, 1999 to the extent of the
US$ 1740820 (Equivalent to Rs. 7,61,32,648/-).

8. It is further submitted that the appellant on 20/25.3.2009, using the

LRS had lent foreign exchange totalling US$ 1000000 (Equivalent to
Rs.5,11,77,650/-) to M/s Maico Trading, Fuajurah, UAE by remitting
the above said foreign exchange from CIT Bank, Combatore to
Account No.0035847160010 of M/s Malco Trading with Emirates
Bank International, and accordingly contravened the provisions of
Section 6(3)(d) of FEMA, 1999 read with Regulation 3 of the Foreign
Exchange Management (Borrowing or Lending in Foreign Exchange)
Regulations, 2000 and Section 4 of FEMA, 1999 to the extent of the
US$ 1000000 (Equivalent to Rs. 5,11,77,650/-).

Therefore, in light of Section 13 of FEMA, 1999, Total penalty of Rs.

13,20,00,000/- has been imposed by the Ld. Adjudicating Authority.

9. It is humbly submitted that second proviso to Section 19 of

FEMA,1999 States that:

“(1) Save as provided in sub-section (2) the Central Government or

any person aggrieved by an order made by an Adjudicating
Authority, other than those referred to in sub-section (1) of section
17, or the Special Director (Appeals), may prefer an appeal to the
Appellate Tribunal:
 5

Provided that any person appealing against the order of the

Adjudicating Authority or the Special Director (Appeals) levying
any penalty, shall while filing the appeal, deposit the amount of
such penalty with such authority as may be notified by the
Central Government.

Provided further that where in any particular case, the Appellate

Tribunal is or the opinion that the deposit of such penalty would
cause undue hardship to such person, the Appellate Tribunal
may dispense with such deposit subject to such conditions as it
may deem fit to impose so as to safeguard the realization of
penalty.

10. It is humbly submitted that a bare reading of both first and second
proviso to section 19(1) of FEMA, 1999 unambiguously lays down a
mandatory condition that any appeal made before this Hon’ble
Tribunal must be accompanied by deposit of penalty as imposed by
the Ld. Adjudicating Authority and though the second proviso confers
power to this Hon’ble Tribunal to dispense with the aforesaid deposit
but the prescribed discretion can only be exercised subject to the
imposition of such conditions, which shall safeguard the realization of
the penalty.

11. It is humbly submitted that various Supreme Court judgments have

interpreted the provisions of Section 19(1) of FEMA, 1999, the Hon’ble
Supreme Court in the case of Monotosh Saha vs. Special Director,
Directorate of Enforcement (Civil Appeal No.5188 of 2008) has
clearly established that the twin conditions of “undue hardship” and
"safeguard the realization of penalty" should be balanced.
Additionally, the Hon’ble Supreme Court has also held that the
burden of proving undue hardship is upon the Appellant.
Additionally, it is also stated that the word “undue” means “excessive
 6

hardship”. The paragraphs from the judgment are retreated herein

below for the sake of brevity.
The Hon’ble Supreme Court in supra has held that “It is true that on
merely establishing a prima facie case, interim order of protection
should not be passed. There can be no rule of universal application is such
matters and the order has to be passed keeping in view of factual scenario
involved. ….

11. Two significant expressions used in the provisions are

"undue hardship to such person" and "safeguard the realization
of penalty". Therefore, while dealing with the application twin
requirements of considerations i.e. consideration of undue
hardship aspect and imposition of conditions to safeguard
the realization of penalty have to be kept in view.

12. As noted above there are two important expressions

in Section 19(1). One is undue hardship. This is a matter
within the special knowledge of the applicant for waiver
and has to be established by him. A mere assertion about
undue hardship would not be sufficient. It was noted by this
Court in S. Vasudeva v. State of Karnataka and Ors. (AIR 1994
SC 923) that under Indian conditions expression "Undue
hardship" is normally related to economic hardship. "Undue"
which 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.

14. The word "undue" adds something more than just hardship. It
means an excessive hardship or a hardship greater than the
circumstances warrant.

15. The other aspect relates to imposition of condition to

safeguard the realization of penalty. This is an aspect which the
Tribunal has to bring into focus. It is for the Tribunal to impose
 7

such conditions as are deemed proper to safeguard the

realization of penalty. Therefore, the Tribunal while dealing with
the application has to consider materials to be placed by the
assessee relating to undue hardship and also to stipulate
condition as required to safeguard the realization of penalty.”

12. In view of the foregoing discussion qua legal position as per section 19
of FEMA, it is pertinent to mention the case of Fayshaw Apparels
Vs. the Appellate Tribunal for Foreign Exchange and The
Special Director [C.M.A. No. 2101 of 2010 and M.P. nos. 1 and 2
of 2010], as decided by the Hon’ble Madras High Court wherein it was
held:

“12. The questions falling for our consideration are, whether the
Appellants have shown undue "hardship" while rejecting the
application for dispensation of pre-deposit and whether the
Appellate Tribunal has judicially exercised the discretion. It is
true that merely establishing a prima facie case, interim order of
dispensation of deposit should not be passed…..

15. As per Section 13 of FEMA, where any person contravenes

any provisions of the Act or contravenes any condition, subject to
which authorisation is issued by Reserve Bank of India he will be
liable to penalty on adjudication upto thrice the sum involved in
such contravention if the amount is quantifiable……. Even
though the adjudicating authority can impose penalty thrice the
sum involved in such contravention, the adjudicating authority
has imposed penalty much lesser than the amount involved in
contravention. In our considered view, the adjudicating authority
itself has judicially exercised its discretion in imposing less
penalty and taking note of the same Appellate Tribunal has
judicially exercised its discretion in dismissing the applications
for dispensation of pre-deposit of penalty.
 8

18…. the Appellate Tribunal has rightly dismissed the

applications dispensing pre-deposit. Mere financial difficulties
cannot be said to be "undue hardship". When the Appellate
Tribunal has judicially exercised its discretion, High
Court/Appellate Court will not interfere with the exercise of
discretion, which has been judicially exercised. The views
expressed by us in this order shall not be construed as
expression of opinion on the merits of the matter.”

13. Further it is most respectfully submitted that the Hon’ble Supreme

Court has categorically laid down that while interpreting fiscal
statutes there is restricted latitude available to a Court while
analyzing provisions of statues such as FEMA, 1999 or Customs Act,
unless express discretion is conferred by the statutes by way of
specific provisions, a court must not adopt liberal construction. The
Hon’ble Supreme Court arrived at the said findings in paragraph nos.
29 and 31 in case titled as Raj Kumar Shivkhare vs. Assistant
Directorate of Enforcement and Anr. [(2010) 4 SCC 772].

14. It is submitted that the relying on the statement recorded, the

appellant claim that he never had any intention to defraud in regard
to compliance with the provisions of FEMA and that appellant had
made sincere attempts to comply with said provisions and regulation,
hence no penalty should have been imposed on him when there is no
mala fide intention to contravene any law. In this regard law laid down
under the act or any prohibition contained in the Act was breached
alone matters.

15. It is to be noted that various judicial forums have reiterated that in

financial matters, if the Act mandates something to be done in a
particular manner, it has to be done in that manner only. The issue of
bona-fide belief of a person or non-awareness of legal requirements
cannot be cited as an excuse to escape from the clutches of law. For
imposition of penalty, all that is to be seen is whether there has been
any contravention of the provisions of the Act i.e. FEMA, Rules,
 9

Regulations, notifications, directions or order issued in exercise of the

powers under FEMA.

16. It is submitted that the ratio laid down by the Hon’ble Supreme Court
in Assistant Collector of Central Excise Chandan Nagar, West
Bengal v. Dunlop India Ltd & Ors. (1985) 1 SCC 260, wherein a
bench of 3 judges laid down exposition of law qua grant of stay in case
of competing factors such prima facie case, etc.

17. Penalty imposed under the provisions of FEMA, 1999 is a breach of

civil obligation by the person contravening the provisions of FEMA
1999. The Proceedings under FEMA, 1999 are not criminal/quasi-
criminal. Also, the contraventions committed by the appellant was a
substantial breach and therefore was liable for imposition penalty
under Section 13 (1) of FEMA, 1999. It is also settled legal principle
that if the statute prescribed that a particular act is to be done in a
particular manner and also lays down that failure to comply with the
said requirements leads to severe consequences, such requirement is
mandatory. It is also a cardinal rule of the interpretation that where a
statute provides that particular thing should be done, it should be
done in the manner prescribed and not in any other way. It is further
submitted that Supreme Court in Monotosh Saha vs. Special
Director, Directorate of Enforcement (Civil Appeal No.5188 of
2008) has held that “It is true that on merely establishing a
prima facie case, interim order of protection should not be
passed.

18. Save and except what are matters of record and facts specifically
admitted by the Respondent above, all averments and assertions of
the Appellant mentioned in the Application for Stay are frivolous,
baseless, denied, devoid of any merit and ought to be rightly rejected.

19. Further, it is submitted that the conduct of the appellant when

analyzed on the touchstone of the principle of “Preponderance of
 10

Probability”, it becomes unambiguously clear the deliberate omission

adopted to commit the contravention as alleged in the compliant and
as adjudicated by the Ld adjudicating authority. Hence, it is
submitted that the application seeking stay as filed by the appellant
does merit any consideration and must be dismissed in toto.

PARAGRAPH-WISE REPLY TO APPLICATION

20. That the contents of paragraph 1 to paragraph 4 to extent forms part

of record are admitted, the reference made to contents of appeal and
reliance placed thereon are denied for being misleading. It is
submitted that the grounds for waiver of pre-deposit are not limited to
the merit of the case which the contents of appeal deal with. The
necessary element for the grant of waiver is “undue hardship” in terms
of the dictums of the Hon’ble Supreme Court cited herein above. In
addition, it is submitted that FEMA 1999, being a civil
enactment does not attract the concept of mens rea as its
ingredient, it has to be considered whether an act was done in
accordance with the law laid down under the provisions of FEMA
and whether any breach was committed of the said prohibition
mentioned under the act. It is to be observed that “FEMA, 1999
being a civil enactment, the issue of mens rea does not matter”.
Whether an act was done in light of the law laid down under the
act or any prohibition contained in the Act was breached alone
matters.

21. That the contents of paragraph 5 and paragraph 6 are false and
denied. It is submitted that the contents of paragraphs imply that the
appellant will incur huge losses and will face undue hardship if he is
directed to pay pre-deposit, to which the Appellant has not even made
an attempt to demonstrate “undue hardship” which has to be
excessive financial hardship as has been laid by the Hon’ble Supreme
Court in catena of judgments and in addition, it is pertinent to
 11

mention that in order to make out a prima-facie case of financial

hardship the Appellant has to make an attempt to demonstrate as to
how undue hardship would be caused to him. It is further
submitted that the documents relied on by the appellant to show
hardship faced by the appellant are not sufficient to show how
the undue hardship caused to him if the penalty is not waived
of.

22. That the contents of paragraph 7 to paragraph 9 are false and denied.
It is settled law, that for the grant of any interim relief akin to a
direction, the party pleading for such relief has to necessarily
establish a prima facie case, balance of convenience, irreparable
injury, and bona-fide conduct. It is respectfully submitted that all
four elements are missing in the present instance. The present
application is meritless and deserves no consideration. It is further
denied that the impugned order is bad in law and has been passed
with a track prejudicial mind. It is submitted that the Ld. Adjudicating
Authority did consider the documents placed on record, Written
Submissions/ submissions made during the personal hearing, and
had Analysed documents and recorded findings in paragraphs 5 to 8
of the impugned order. It is pertinent to note that the appellant has
mis-declared the amount and has also violated the limit prescribed in
LRS and has thus, contravened the provisions of FEMA,1999, hence,
the present appeal along with the application deserves to be
dismissed.

23. It is humbly submitted that the Adjudicating Authority expressing a

lenient view has levied a penalty of lower quantum as compared to
that of the contravention. Therefore, it is clear that the Adjudicating
Authority has already taken a lenient view in levying penalty, hence it
is humbly submitted that in view of the same, no further leniency
should be granted by the Hon’ble Appellate Tribunal in light of the
 12

lack of any evidence produced on record by the Appellant to support

the same.

24. In view of the aforesaid submissions and in light of judicial

pronouncement as regards interpretation of Section 19 of FEMA,
1999, it is respectfully submitted that the present Application
deserves to be dismissed in totality, since the present Application does
not qualify within the prerequisite criteria as mandated under Section
19 (1) of FEMA, 1999 and interpretation of the said provision as laid
down by the Hon’ble Supreme and High Courts.

PRAYER

It is, therefore, respectfully prayed that this Hon’ble Tribunal may graciously
be pleased to: -

a) Dismiss the present Application filed by the Appellant u/s 19(1) of

FEMA, 1999 r/w Rule 10 of FEM (Adjudication Proceedings and
Appeal) Rules, 2000 seeking dispensation with deposit of penalty
amount and stay of the order dated 28.11.2019 ;

b) Pass other or further order/s which this Hon’ble Tribunal may

deem fit and proper in the facts and circumstances of the case.

DELHI
DATE:15.04.2024
ON BEHALF OF

DIRECTORATE OF ENFORCEMENT,
GOVERNMENT OF INDIA

THROUGH

PANKAJ PANDEY
Advocate
OFF: A – 15 FIRST FLOOR
NIZAMUDDIN EAST
NEW DELHI-110013
Email: officeofpankajpandey@gmail.com
 13

MOB: 9560031419
 14

BEFORE THE APPELLATE TRIBUNAL FOR FOREIGN EXCHANGE,

4TH FLOOR, LOK NAYAK BHAVAN, KHAN MARKET,
NEW DELHI-110003

FPA-FE-02/CHN/2020

IN THE MATTER OF:

Sh. Martin @ Santiago Martin ….Appellant
Vs.
Assistant Director,
Directorate of Enforcement ....Respondent

AFFIDAVIT
I, _____________________, S/o __________________, R/o _______________,
working as Assistant Director of the Respondent, do hereby solemnly affirm
and declare as under:-

1. I say that I am the Assistant Director of the Respondent and

authorised to file the accompanying Reply.
2. I am well conversant with the facts of the case and as such am
competent to swear this affidavit.
3. That the contents of the accompanying Reply to application are true to
the best of my knowledge.

DEPONENT
VERIFICATION:
I, the deponent abovenamed, do hereby verify that the contents of my above
affidavit are true to my knowledge and best belief, no part of it is false and
nothing material has been concealed therefrom.

Verified at New Delhi on this the __ day of April, 2024.

DEPONENT