George Koch Sons India Pvt. Ltd

Present V. G. Sekar Chief General Manager Date: December 26, 2019 CA No. NDL 502/2019 In the matter of George Koch Sons India Private Limited D-31, South Extension, Part - I, New Delhi - 110049 (Applicant) In exercise of the powers under Section 15(1) of Foreign Exchange Management Act, 1999 and the Regulations/ Rules/ Notifications/ Orders made thereunder, I pass the following Order. ORDER The applicant has filed the compounding application dated July 22, 2019 (received at Reserve Bank of India, New Delhi on July 25, 2019) and addendums dated September 07, 2019 and December 04, 2019 for compounding of contraventions of the provisions of the Foreign Exchange Management Act, 1999 (hereinafter referred to as FEMA) and the regulations issued thereunder. The contraventions sought to be compounded are those of (i) delay in reporting foreign inward remittance received for issue of shares, and (ii) delay in filing Form FC-GPR after issue of shares, in terms of paragraphs 9(1)(A) and 9(1)(B) 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 May 3, 2000 (hereinafter referred to as FEMA 20/2000-RB), as then applicable.

George Koch Sons India Private Limited CA No. NDL 502/2019

2. The relevant facts of the case are as follows: (a) The applicant company was incorporated on July 30, 2013 in the State of Tamil Nadu and is engaged in the business of undertaking the engineering, designing, manufacturing, installing and commissioning coating system work. The applicant shifted its registered office from Chennai in the State of Tamil Nadu to Delhi vide RoC Delhi’s order dated December 01, 2016. (b) The applicant had received foreign inward remittance of ₹1,57,96,358/- from its foreign investor, M/s George Koch and Sons LLC, USA, on August 30, 2017 and reported the same on July 10, 2019 with a delay of 11 months and 2 days, beyond the prescribed period in contravention of paragraph 9(1)(A) of Schedule 1 to FEMA 20/2000-RB, as then applicable. Whereas, in terms of paragraph 9(1)(A) of Schedule 1 to FEMA 20/2000-RB, an Indian company issuing shares or convertible debentures or warrants in accordance with these Regulations shall submit through AD bank to the Regional Office concerned of the Reserve Bank under whose jurisdiction the Registered office of the company operates, not later than 30 days from the date of receipt of the amount of consideration received by Indian company for issue of shares or convertible debentures or warrants, a report in Advance Reporting Form as specified by Reserve Bank from time to time along with a copy/ies of documents prescribed therein.

Reporting of receipt of foreign inward remittance for issue of capital instruments was dispensed with in terms of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) (Second Amendment) Regulations, 2018 with effect from September 1, 2018. Delay in reporting of foreign inward remittance has, therefore, been taken up to August 31, 2018. (c) The applicant had issued 12,916 equity shares for a consideration of ₹1,57,96,268/- to its foreign investor, M/s George Koch and Sons LLC, USA, on October 28, 2017 and reported the same on July 10, 2019 with a delay of 1 year, 7 months and 13 days, beyond the prescribed period in contravention of paragraph 9(1)(B) of Schedule 1 to FEMA 20/2000-RB, as then applicable. Whereas, in terms of paragraph 9(1)(B) of Schedule 1 to FEMA 20/2000-RB, an Indian company issuing shares or convertible debentures or warrants in accordance with these Regulations shall submit through AD bank to the Regional Office concerned of the Reserve Bank under whose jurisdiction the Registered office of the company operates not later than 30 days from the date of issue of shares or convertible debentures or warrants, a George Koch Sons India Private Limited CA No. NDL 502/2019 report in the Form FC-GPR as specified by the Reserve Bank from time to time together with the documents prescribed therein.

Further, on one more occasion there was delay in reporting the issue of shares in Form FC-GPR in contravention of the provisions of Regulation 13.1(2) of FEMA 20(R)/2017-RB, as then applicable, and the applicant paid Late Submission Fee (LSF) for the said contravention as required in terms of Regulation 13.2 of FEMA 20(R)/2017-RB. (d) Thus, there are contraventions of paragraphs 9(1)(A) and 9(1)(B) of Schedule 1 to FEMA 20/2000-RB, as then applicable.

3. The applicant was given an opportunity for personal hearing for further submission in person and/ or by producing documents, if any, in support of the application. Shri Sandeep Garg, Consultant, appeared for personal hearing on December 24, 2019 on behalf of the applicant. The representative admitted the contraventions committed by the applicant for which compounding has been sought. During the personal hearing, he submitted that the contraventions were without any malafide or wilful intention but were mainly due to delay in receipt of FIRC and KYC. He requested for a lenient view in the matter. The application for compounding is, therefore, being considered on the basis of averments made in the application as well as other documents and submissions made during the personal hearing.

4. I have given my careful consideration to the documents on record and submissions made by the applicant during the personal hearing. Accordingly, I hold that the applicant has contravened the following FEMA provisions: (a) Paragraph 9(1)(A) of Schedule 1 to FEMA 20/2000-RB, as then applicable, on account of delay in reporting foreign inward remittance received for issue of shares as detailed in paragraph 2(b) above. The contravention relates to an amount of ₹1,57,96,358/- (Rupees One Crore Fifty Seven Lakh Ninety Six Thousand Three Hundred and Fifty Eight only) and the period of delay is 11 months and 2 days. (b) Paragraph 9(1)(B) of Schedule 1 to FEMA 20/2000-RB, as then applicable, on account of delay in filing Form FC-GPR after issue of shares as detailed in paragraph 2(c) above. The contravention relates to an amount of ₹1,57,96,268/- (Rupees One Crore Fifty Seven Lakh Ninety Six Thousand Two Hundred and Sixty Eight only) and the period of delay is 1 year, 7 months and 13 days.

George Koch Sons India Private Limited CA No. NDL 502/2019

5. It has been declared in the compounding application dated July 22, 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 also been declared in the declaration dated September 07, 2019 furnished as part of the compounding application 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. 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 FEMA, any person contravening any provision of the Act shall be liable to a penalty up to thrice the sum involved in such contraventions upon adjudication. After considering the submissions made by the applicant and the entire facts and circumstances of the case I am persuaded to compound the contraventions, in line with the Guidance Note on Computation Matrix prescribed as part of Master Direction – Compounding of Contraventions, framed in accordance with the Foreign Exchange (Compounding Proceedings) Rules 2000. Accordingly, it stands to reason that payment of an amount of ₹1,53,500/- (Rupees One Lakh Fifty Three Thousand and Five Hundred only) will meet the ends of justice in the circumstances of this case.

7. Accordingly, I compound the admitted contraventions of paragraphs 9(1)(A) and 9(1)(B) of Schedule 1 to FEMA 20/2000-RB, as then applicable, by the applicant based on the facts detailed above in terms of the Foreign Exchange (Compounding Proceedings) Rules, 2000, on payment of an amount of ₹1,53,500/- (Rupees One Lakh Fifty Three Thousand and Five Hundred only) which shall be deposited by the applicant with the Reserve Bank of India, Foreign Exchange Department, 6, Sansad Marg, New Delhi - 110001 by a demand draft drawn in favour of the “Reserve Bank of India” and payable at New Delhi within a period of 15 days from the date of this Order. In case of failure to deposit the compounded amount within the above

George Koch Sons India Private Limited CA No. NDL 502/2019 mentioned period, Rule 10 of the Foreign Exchange (Compounding Proceedings) Rules, 2000 dated May 3, 2000 shall apply. The application is disposed accordingly. Dated this the 26th day of December 2019.

Sd/- (V. G. Sekar) Chief General Manager