Dazsi systems (India) Private Limited

In the RESERVE BANK OF INDIA Foreign Exchange Department Secretariat Road Saifabad, Hyderabad 500 004 Present Shri. Kalyan Chakravarthy Assistant General Manager Date: May 14, 2019 C.A. HYD 408 In the matter of M/s. Dazsi Systems (India) Private Limited Tower A, 5th Floor, Ananth Info Park Plot No. 39, Phase II, Hi-Tech City, Madhapur Hyderabad – 500 081 (Applicant) In exercise of the powers conferred under sub-section 1 of Section 15 of Foreign Exchange Management Act, 1999 and the Regulations/ Rules/ Notifications/ Orders made thereunder, I pass the following Order The applicant has submitted the compounding application dated February 12, 2019, received by us on February 14, 2019 for compounding of contraventions of the provision of the Foreign Exchange Management Act, 1999 (FEMA) and the regulations issued thereunder. The contraventions sought to be compounded are (i) delay in reporting of receipt of foreign inward remittances towards subscription of equity, (ii) delay in submission of Form FCGPR to the Reserve Bank after issue of shares to a person resident outside India, (iii) delay in receipt of consideration after allotment of shares to a person resident outside India (iv) delay in refund of excess

Compounding of contraventions under FEMA 1999 M/s. Dazsi Systems (India) Private Limited CA No. HYD 408 share application money and (v) delay in filing the annual return in respect of the Foreign Liabilities and Assets (FLA Return), in terms of Paragraph 9(1)(A), Paragraph 9(1)(B), Paragraph 8 and Paragraph 9(2) 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 as then applicable (hereinafter referred to as Notification No. FEMA 20/2000-RB) and Regulation 13.1(3) of Schedule I to Notification No. FEMA 20(R)/2017-RB dated November 07, 2017 as amended from time to time. 2. The relevant facts of the case are as follows: a) The applicant is a resident company incorporated as Private Limited Company under the Companies Act, 1956 on May 24, 2005 (CIN: U72200TG2005PTC045702). The company is engaged in the business of information technology services industry in India and abroad. b) The applicant had received foreign inward remittances from the following foreign investors as indicated below: Sl Name of the Remitter Total Amount Date of Date of No (INR) Receipt Reporting 1 Daz Systems Inc., USA 4,33,500 08.08.2005 07.01.2019 2 Deborah Arnold, USA 2109.72* 30.01.2019 Not applicable Total 4,35,609.72 * Reporting of inward remittance is not required for the remittances received after September 01, 2018 The applicant had received total remittances towards share subscription amounting to ₹ 4,35,609.72, out of which they have reported inward remittance of ₹ 4,33,500/-to the Regional Office of Reserve Bank of India with a delay of 13 years 4 months 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

Compounding of contraventions under FEMA 1999 M/s. Dazsi Systems (India) Private Limited CA No. HYD 408 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. c) The applicant allotted equity shares and filed form FC-GPRs as indicated

Sl Name of the investor Date of Number of Amount for Date of No allotment of shares which shares reporting shares allotted allotted (INR) 1 Daz Systems Inc., USA 24.03.2005 9,999 99,990 07.01.2019 2 Deborah Arnold, USA 24.03.2005 1 10 08.02.2019 Total 1,00,000 below: The applicant filed form FCGPRs for the allotment of shares amounting to ₹ 1,00,000/- as indicated above and the same were reported with delays ranging from 13 years 8 months 15 days to 13 years 9 months 16 days 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 a report in form FCGPR along with documents prescribed therein within 30 days from the date of issue of shares to person resident outside India. d) The applicant has delayed in receiving inward remittance of ₹ 10/- after allotment of shares with a delay of 13 years 10 months 7 days approximately as shown below Sl Name of Remitter Amount Date of Date of No (INR) Allotment Receipt 1 Deborah Arnold, USA 10 24.03.2005 30.01.2019 Total 10

Compounding of contraventions under FEMA 1999 M/s. Dazsi Systems (India) Private Limited CA No. HYD 408 e) The applicant has also delayed in refund of excess share application money of ₹ 3,33,510/- with a delay of 11 years 1 month 14 days approximately as shown below

Sl Name of Date of Total Total Excess Date of No Remitter receipt amount amount share seeking received allotted application approval (INR) (INR) money (INR) from RBI 1 Daz Systems 08.08.2005 4,33,500 99,990 3,33,510 12.01.2019 Inc., USA Total 4,33,500 3,33,510

Whereas in terms of Paragraph 8 of Schedule 1 to Notification No. FEMA 20/2000- RB read with A.P (DIR Series) Circular No. 20 dated December 14, 2007, 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. f) The company has delayed in filing FLA Return (Foreign liabilities and Assets) as shown below, with delays ranging from 8 months 5 days to 11 years 8 months 18 days approximately as shown below

Compounding of contraventions under FEMA 1999 M/s. Dazsi Systems (India) Private Limited CA No. HYD 408

Sl Particulars Financial year Due date of filing Date of actual No the return filing 1 FLA Return 2006-07 30.06.2007 20.03.2019 2 FLA Return 2007-08 30.06.2008 20.03.2019 3 FLA Return 2008-09 30.06.2009 20.03.2019 4 FLA Return 2009-10 30.06.2010 20.03.2019 5 FLA Return 2010-11 15.07.2011 19.03.2019 6 FLA Return 2011-12 15.07.2012 19.03.2019 7 FLA Return 2012-13 15.07.2013 19.03.2019 8 FLA Return 2013-14 15.07.2014 19.03.2019 9 FLA Return 2014-15 15.07.2015 19.03.2019 10 FLA Return 2015-16 15.07.2016 19.03.2019 11 FLA Return 2016-17 15.07.2017 19.03.2019 12 FLA Return 2017-18 15.07.2018 19.03.2019

Whereas in terms of Para 9(2) of Schedule I to Notification No. FEMA 20/2000-RB dated May 03, 2000 as then applicable and Regulation 13.1(3) of Schedule I to Notification No. FEMA 20(R)/2017-RB dated November 07, 2017 as amended from time to time, “All Indian companies which have received Foreign Direct Investment in the previous year(s) including the current year shall submit to the Reserve Bank of India, on or before the 15th day of July of each year, [a report titled ‘Annual Return on Foreign Liabilities and Assets’ (FLA) as specified by the Reserve Bank from time to time]. 3. (a) The applicant was given an opportunity for personal hearing vide Reserve Bank’s letter No. HY.FE.FID/2203/14.08.642/2018-19 dated April 16, 2019 for further submission in person and/or producing documents, if any, in support of the application.

Compounding of contraventions under FEMA 1999 M/s. Dazsi Systems (India) Private Limited CA No. HYD 408 (b) The applicant vide e-mail dated April 21, 2019 stated that they are foregoing appearing for the personal hearing and requested that the compounding application may be disposed of on the basis of merits in terms of the facts/submission made therein along with the compounding application. The application for compounding is, therefore, being considered on the basis of the averments/ submissions made in the application. 4. I have given my careful consideration to the documents on record. Accordingly, I hold that the applicant 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 ₹ 4,33,500/- with a delay of 13 years 4 months approximately. (b) Paragraph 9(1)(B) of Schedule 1 to Notification No. 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 ₹ 1,00,000/- and the delay ranges from 13 years 8 months 15 days to 13 years 9 months 16 days approximately. (c) Paragraph 8 of Schedule 1 to Notification No. FEMA 20/2000-RB for delay in (i) receipt of consideration after allotment of shares to the non-resident investor and the contravention relates to an amount of ₹ 10/- with a delay of 13 years 10 months 7 days approximately. (ii) delay in refund of excess share application money to the non-resident investor and the contravention relates to an amount of ₹ 3,33,510/- with a delay of 11 years 1 month 14 days approximately. (e) Paragraph 9(2) of Schedule I to Notification No. FEMA 20/2000-RB and Paragraph 13.1(3) of Schedule I to Notification No. FEMA 20(R)/2017-RB for delay in filing of Annual Return on Foreign Liabilities and Assets (FLA Return) to Reserve

Compounding of contraventions under FEMA 1999 M/s. Dazsi Systems (India) Private Limited CA No. HYD 408 Bank of India for twelve financial years viz. 2006-07 to 2017-18 with delays ranging from 8 months 5 days to 11 years 8 months 18 days approximately. 5. It has been declared in the compounding application dated February 12, 2019 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 April 22, 2019 that the applicant was not under any enquiry/investigation/adjudication 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. It has further been declared that the applicant has not filed any appeal under section 17 or section 19 of FEMA, 1999. 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 other 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 ₹ 1,99,588 /- (Rupees One Lakh Ninety Nine Thousand Five Hundred Eighty Eight 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), Paragraph 8 and Paragraph 9(2) 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 and Regulation 13.1(3) of Schedule I to Notification No. FEMA 20(R)/2017-RB of Schedule 1 to Notification No. FEMA-20/2000-RB by the applicant

Compounding of contraventions under FEMA 1999 M/s. Dazsi Systems (India) Private Limited CA No. HYD 408 on the facts discussed above in terms of the Foreign Exchange (Compounding Proceedings) Rules, 2000 on payment of an amount ₹ 1,99,588 /- (Rupees One Lakh Ninety Nine Thousand Five Hundred Eighty Eight 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 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 of accordingly. Dated this 14th day of May 2019

Sd/- (Kalyan Chakravarty) Assistant General Manager