CLT Apparel India Private Limited

In the matter of M/s CLT Apparel India Private Limited Plot No.18, Brandix India Apparel City SEZ Pudimadaka Road, Atchuthapuram Mandal Visakhapatnam - 531011 (Applicant) In exercise of the powers conferred under Section 15 (1) of Foreign Exchange Management Act, 1999 and the Regulations/ Rules/ Notifications/ Orders made there under, I pass the following Order The applicant has filed the compounding application dated October 20, 2017 received by us on November 01, 2017 for compounding of contraventions of the provisions of the Foreign Exchange Management Act, 1999 (the FEMA) and the regulations issued thereunder. The contraventions sought to be compounded are (i) delay in reporting receipt of foreign inward remittances; (ii) delay in submission of Form FC-GPR to the Reserve Bank of India after issue of shares towards subscription to equity and (iii) neither the shares were issued nor amount refunded to the overseas investor within 180 days from the date of receipt of inward remittance in Compounding of contraventions under FEMA 1999 M/s CLT Apparel India Private Limited CA No. HYD 260 terms of Paragraph 9(1)(A), Paragraph 9(1)(B) and Paragraph 8 respectively of Schedule 1 to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 notified vide Notification No. FEMA.20/2000-RB dated 3rd May 2000 (hereinafter referred to as Notification No. FEMA 20 /2000-RB) as then applicable.

2. The relevant facts of the case are as follows:

a) M/s. CLT Apparel India Private Limited (herein referred to as company) was a company originally incorporated as M/s. BIAC Clothing India Private Limited under the Companies Act, 1956 on February 10, 2010 and changed its name to M/s. CLT Apparel India Private Limited on April 22, 2010 (CIN: U18101AP2010PTC066977). In terms of Scheme of Amalgamation vide Honorable High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh order dated 06.11.2014 with M/s.Brandix Apparel India Private Limited, the company was merged with the latter. Pursuant to the amalgamation, the compounding application was filed by M/s.Brandix Apparel India Private Limited. The company was engaged in the business of manufacture and sale of apparels.

b) The company had received foreign inward remittances from the foreign investor as indicated below:

Sl. Total Amount Date of Date of Name of Remitter No (INR) Receipt Reporting 1 Brandix International Ltd 1402500.00 08-09-2010 05-10-2010 Sri Lanka 2 BLK Apparel Mauritius Ltd 15487057.50 20-10-2010 27-10-2010 3 BLK Apparel Mauritius Ltd 4439556.00 01-11-2010 29-11-2010 4 BLK Apparel Mauritius Ltd 22170000.00 10-11-2010 29-11-2010 5 BLK Apparel Mauritius Ltd 2035797.50 02-12-2010 13-01-2011

Compounding of contraventions under FEMA 1999 M/s CLT Apparel India Private Limited CA No. HYD 260 6 BLK Apparel Mauritius Ltd 5858649.30 08-12-2010 11-04-2011 7 BLK Apparel Mauritius Ltd 2238552.20 04-01-2010 02-02-2011 8 BLK Apparel Mauritius Ltd 9075546.20 18-01-2010 02-02-2011 9 BLK Apparel Mauritius Ltd 3187105.88 07-02-2011 02-03-2011 10 BLK Apparel Mauritius Ltd 4529547.00 25-02-2011 11-04-2011 11 BLK Apparel Mauritius Ltd 3822850.20 09-03-2011 11-04-2011 12 BLK Apparel Mauritius Ltd 2885556.00 05-04-2011 23-04-2011 13 BLK Apparel Mauritius Ltd 16368357.60 21-04-2011 04-05-2011 14 BLK Apparel Mauritius Ltd 6229555.00 04-05-2011 17-05-2011 15 BLK Apparel Mauritius Ltd 4464553.50 06-06-2011 21-07-2011 16 BLK Apparel Mauritius Ltd 3684756.00 29-06-2011 09-08-2011 17 BLK Apparel Mauritius Ltd 4573468.50 27-07-2011 09-08-2011 18 BLK Apparel Mauritius Ltd 5962023.00 15-09-2011 11-12-2011 19 BLK Apparel Mauritius Ltd 18048755.50 26-09-2011 03-02-2012 20 BLK Apparel Mauritius Ltd 4871012.85 11-10-2011 08-11-2011 21 BLK Apparel Mauritius Ltd 2316985.00 28-11-2011 19-12-2011 22 BLK Apparel Mauritius Ltd 2458460.70 04-01-2012 19-01-2012 23 BLK Apparel Mauritius Ltd 2033146.50 06-02-2012 23-02-2012 24 BLK Apparel Mauritius Ltd 1156893.90 03-05-2012 28-05-2012 25 BLK Apparel Mauritius Ltd 14388957.00 06-07-2012 19-07-2012 Total 16,36,89,642.83

The company reported receipt of remittances towards share subscription amounting to Rs.16,36,89,642.83/- to the Regional Office of Reserve Bank of India on dates indicated as above out of which remittances amounting to Rs.5,97,21,030.40/- were reported with delays ranging from 3 days to 11 months 30 days approximately beyond the prescribed limit. Whereas in terms of Paragraph 9(1)(A) of Schedule 1 to Notification No. FEMA 20/2000-RB, an Indian company issuing shares or convertible debentures in accordance with these Regulations should report to the Reserve Bank of India as per the prescribed procedure not later than 30 days from the date of receipt of the amount of consideration.

Compounding of contraventions under FEMA 1999 M/s CLT Apparel India Private Limited CA No. HYD 260 c) The company allotted shares and filed form FC-GPRs as indicated below:-

Date of Number of Amount for Date Sl No Name of investor allotment shares/CC which shares of reporting of shares PS allotted allotted (INR) BLK Apparel 1 13-04-2011 309741 15487050 30-05-2011 Mauritius Ltd BLK Apparel 2 26-04-2011 88791 4439550 30-05-2011 Mauritius Ltd 30-05-2011 BLK Apparel 3 03-05-2011 1058360 52918000 Mauritius Ltd BLK Apparel 4 19-09-2011 672655 33632750 19-10-2011 Mauritius Ltd BLK Apparel 5 20-01-2012 91469 4573450 21-05-2013 Mauritius Ltd BLK Apparel 6 10-02-2012 623975 31198750 22-05-2013 Mauritius Ltd BLK Apparel 11-09-2013 400749 20037450 09-10-2013 7 Mauritius Ltd Total 3245740 16,22,87,000

The company filed form FC-GPRs for the allotment of shares amounting to Rs.16,22,87,000/- as indicated above out of which shares amounting to Rs.5,56,98,800/- were reported with delays ranging from 4 days to 1 year 3 months 1 day approximately beyond the prescribed limit. Whereas in terms of Paragraph 9(1)(B) of Schedule 1 to Notification No. FEMA 20/2000-RB, an Indian company issuing shares in accordance with these Regulations has to submit to Reserve Bank of India a report in Form FC-GPR along with Compounding of contraventions under FEMA 1999 M/s CLT Apparel India Private Limited CA No. HYD 260 documents prescribed therein within 30 days from the date of issue of shares to a person resident outside India.

d. (i) The company has delayed in refund of the share application money to the non-resident investor beyond the prescribed period of 180 days from the date of receipt of remittance amounting to Rs.14,02,500/-and the period of delay is 4 months 7 days as indicated below:-

Total Date of seeking Date of Sl No Name of Remitter Amount approval for Receipt (INR) refund BLK International Ltd, 1 1402500 08-09-2010 15.07.2011 Srilanka Total 14,02,500

Whereas in terms of Paragraph 8 of Schedule 1 to Notification No. FEMA 20/2000- RB, if the shares are not issued within 180 days from the date of receipt of the inward remittance, the amount of consideration so received shall be refunded to the person concerned, provided the Reserve Bank may on an application made to it and for sufficient reasons permit to refund the amount of consideration received towards issue of security, if such amount is outstanding beyond a period of 180 days from the date of receipt. The amendment in Paragraph 8 of Schedule 1 to Notification No. FEMA 20/20000-RB was introduced by issue of Foreign Exchange Management (Transfer or Issue of Security by a Person outside India) (Third Amendment Regulation, 2007 notified, vide Notification No. FEMA 170/2007-RB dated 13th November, 2007 in the official Gazette of the Govt. of India.

(ii) The company has also delayed in allotment of shares beyond the stipulated period of 180 days in respect of remittances aggregating to Rs.2,00,37,458.10/- and Compounding of contraventions under FEMA 1999 M/s CLT Apparel India Private Limited CA No. HYD 260 the delay ranges from 8 months 6 days to 1 year 2 months 8 days approximately as indicated below:

Sl Name of Remitter Total Amount Date of Date of No (INR) Receipt allotment

1 BLK Apparel Mauritius Ltd. 2458460.70 04.01.2012 11.09.2013 2 BLK Apparel Mauritius Ltd. 2033146.50 06.02.2012 11.09.2013 3 BLK Apparel Mauritius Ltd. 1156893.90 03.05.2012 11.09.2013 4 BLK Apparel Mauritius Ltd. 14388957 06.07.2012 11.09.2013 Total 2,00,37,458.10

The applicant issued the shares after the receipt of inward remittances with delays ranging from 8 months 6 days to 1 year 2 months 8 days approximately. The delay in issuance of shares beyond the prescribed period is in contravention of Paragraph 8 of Schedule 1 to FEMA Notification No.20/2000 RB dated May 03, 2000 in terms of which an Indian company in accordance with these regulations has to issue the shares within 180 days from the date of receipt of consideration.

3. (a) The applicant was given an opportunity for personal hearing vide Reserve Bank’s letter No. HY.FE.FID/1518/14.66.003/2017-18 dated February 28, 2018 for further submission in person and/or producing documents, if any, in support of the application.

(b) The applicant appeared for personal hearing on March 05, 2018 during which Shri Hathy Rasool, Authorized representative of the company represented the applicant. The authorized representative of the applicant admitted the contraventions for which the compounding has been sought. During the personal hearing, it was submitted that the delay was on account of labour issues and ignorance of FEMA Regulations but was not wilful or with malafide intention. In view of the foregoing, the Compounding of contraventions under FEMA 1999 M/s CLT Apparel India Private Limited CA No. HYD 260 representative of the applicant requested to take a lenient view in disposal of the application. The application for compounding is, therefore, being considered on the basis of the averments made in the application as well as the submissions made in this context by the applicant during the personal hearing.

4. I have given my careful consideration to the documents on record. Accordingly, I hold that the transferor company on whose behalf the application for compounding has been received, has contravened the following FEMA provisions issued in terms of:- (a) Paragraph 9(1)(A) of Schedule 1 to Notification No. FEMA 20/2000-RB for delay in reporting the receipt of consideration towards issue of shares amounting to Rs.5,97,21,030.40/- and the delay ranges from 3 days to 11 months 30 days approximately.

(b) Paragraph 9(1)(B) of Schedule 1 to Notification No. FEMA 20/2000-RB for delay in submission of Form FC-GPR to Reserve Bank of India after issue of shares to persons resident outside India and the contravention relates to an amount of Rs.5,56,98,800/- and the period of delay ranges from 4 days to 1 year 3 months 1 day approximately.

(c) Paragraph 8 of Schedule 1 to Notification No. FEMA 20/2000-RB: (i) for delay in refund of unallotted share application money and the contravention relates to an amount of Rs.14,02,500/- with a delay of 4 months 7 days approximately.

(ii) for delay in allotment of shares in respect of the remittances aggregating to Rs.2,00,37,458.10/- with a delay ranging from 8 months 6 days to 1 year 2 months 8 days approximately.

Compounding of contraventions under FEMA 1999 M/s CLT Apparel India Private Limited CA No. HYD 260

5. It has been declared in the compounding application dated 20.10.2017 filed by the transferee company, M/s Brandix Apparel India Private Ltd that the particulars given by the applicant in the application are true and correct to the best of their knowledge and belief. It has been declared in the declaration dated 21.10.2017 furnished with the compounding application that the applicant was not under any investigation by any agency as on the date of the application and has, in this regard, not informed of initiation of any such enquiry/investigation/adjudication proceedings against it thereafter. Accordingly, the above contraventions which are being compounded in this Order are subject to the veracity of the above declarations made by the applicant and this order is without prejudice to any action which may be taken by any authority under the extant laws if the said declarations are subsequently discovered to be false and/or incorrect.

6. In terms of Section 13 of the FEMA, any person contravening any provision of the Act shall be liable to a penalty up to thrice the sum involved in such contravention upon adjudication. However, taking into account the relevant facts and circumstances of the case as stated in the foregoing paragraphs, I am persuaded to take a lenient view on the amount for which the contravention is to be compounded and I consider that an amount of Rs.2,26,260/- (Rupees Two Lakhs Twenty Six Thousand Two Hundred Sixty Only) will meet the ends of justice.

7. Accordingly, I compound the admitted contraventions, namely, the contraventions of Paragraph 9(1)(A), Paragraph 9(1)(B) and Paragraph 8 of Schedule 1 to Notification No. FEMA-20/2000-RB by the applicant on the facts discussed above in terms of the Foreign Exchange (Compounding Proceedings) Rules, 2000 on payment of an amount of Rs.2,26,260/- (Rupees Two Lakhs Twenty Six Thousand Two Hundred Sixty Only) which shall be deposited by the applicant with the Reserve Bank of India, Foreign Exchange Department, 1st Floor, Saifabad, Hyderabad - 500004 by a demand draft drawn in favour of the "Reserve Bank of India" and Compounding of contraventions under FEMA 1999 M/s CLT Apparel India Private Limited CA No. HYD 260 payable at Hyderabad within a period of 15 days from the date of this order. In case of failure to deposit the compounded amount within the above mentioned period, Rule10 of the Foreign Exchange (Compounding Proceedings) Rules, 2000 dated May 3, 2000 shall apply.

The application is disposed accordingly.

Dated this 8th day of March 2018

Sd/- (R. Subramanian) Regional Director