Provigil Surveillance Ltd.
- CitationRBI Compounding Order CA No. HYD 144
Ratio decidendi
The rule this decision rests on
A compounding order under Section 15(1) of the Foreign Exchange Management Act, 1999 may be passed where the applicant admits the contraventions for which compounding is sought, and the adjudicating authority, having considered the documents and the applicant's submissions at personal hearing, is satisfied that a lenient view is warranted and fixes the compounded sum at a figure lower than the penalty otherwise exposed under Section 13, as the authority considers sufficient to meet the ends of justice. A late filing of Form FC-GPR after the issue of shares to a person resident outside India, beyond the thirty-day period prescribed by Paragraph 9(1)(B) of Schedule 1 to Notification No. FEMA 20/2000-RB, constitutes a contravention of that paragraph which is capable of compounding under the Foreign Exchange (Compounding Proceedings) Rules, 2000, where the company has not received any foreign exchange and the failure to report is inadvertent rather than wilful or mala fide. The taking on record by a company of a transfer of shares from a resident to a non-resident, without a certified or bank-acknowledged Form FC-TRS, contravenes Regulation 4 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, and such contravention is likewise compoundable under the same Rules on the same footing.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
(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 July 09, 2016 received on July 14, 2016 and addendum dated August 31, 2016 for compounding of contravention of the provision of the Foreign Exchange Management Act, 1999 (the FEMA) and the regulations issued there under. The contraventions sought to be compounded are (i) taking on record the transfer of shares without filing certified form FC-TRS in contravention of Regulation 4 and (ii) delay in submission of Form FC-GPR to the Reserve Bank after issue of shares to a person resident outside India in terms of Paragraph 9 (1) (B) of Schedule 1 to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 notified vide
FED M/s. Provigil Surveillance Limited CA No. HYD 144 Notification No. FEMA.20/2000-RB dated 3rd May 2000 and as amended from time to time (hereinafter referred to as Notification No. FEMA 20 /2000-RB).
2. The relevant facts of the case are as follows:
a) The applicant is a resident company originally incorporated on April 30, 1992 as M/s. VIVID Ventures Limited under Companies Act, 1956 and subsequently changed the name of the company to M/s. Provigil Surveillance Limited on November 06, 2007. The company is engaged in the business of providing security systems services activities.
b) The company allotted equity shares and filed Form FC-GPRs as indicated below:
Sl Name of Date of Number of Amount for Date of No Investor allotment of shares which shares reporting shares allotted allotted (`) RAVK Ltd 1 37,42,020 37,42,020 Jeremy 2 White 19,59,300 19,59,300 Ramesh 3 Kancheria 2,75,940 2,75,940 Vamshi K 4 Kancheria 1,47,600 1,47,600 Swarupa 29.09.2012 22.02.2016 5 Kancheria 1,47,600 1,47,600 Syam 6 Vemulapalli 1,47,600 1,47,600 Patibandla 7 Family Ltd 3,68,100 3,68,100 Scott 8 Sanford 1,47,600 1,47,600 Satya Prasad 9 Tummala 1,00,800 1,00,800
FED M/s. Provigil Surveillance Limited CA No. HYD 144 Angirekula Family Ltd 10 Partnership 2,68,200 2,68,200 Gurru Family Partnership 11 Ltd 3,33,900 3,33,900 Geneva Insurance 12 SPC Ltd 3,33,900 3,33,900 Raja Family 13 Ltd 1,96,830 1,96,830 Prasad 14 Family LP 1,34,100 1,34,100 Katta LLC 15 1,07,100 1,07,100 Benjamin M 16 Molloy 8,010 8,010 Ravikumar 17 P. Vemuru 1,80,000 1,80,000
Total 85,98,600 85,98,600 The applicant filed Form FC-GPR for the allotment of 85,98,600 bonus equity shares of ` 1/- each amounting to ` 85,98,600/- shares with a delay of 3 years 3 months 25 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 FC- GPR along with documents prescribed therein within 30 days from the date of issue of shares to person resident outside India.
FED M/s. Provigil Surveillance Limited CA No. HYD 144 c) The company has taken on record transfer of shares without obtaining certified copy of FC-TRS as detailed below: Sr Name of the Date of Number of Value of Date of No transferees transfer shares shares filing of transferred transferred FC-TRS (`) Venkata Nagendra 28.12.2012 82,500 13,20,000 09.01.2015 1 Murali Mohan Rachapoodi Sudhir Kumar 28.12.2012 40,000 6,40,000 09.01.2015 2 Machetti Venkata Nagendra 15.10.2013 1,17,500 18,80,000 13.01.2015 3 Murali Mohan Rachapoodi Sudhir Kumar 15.10.2013 60,000 9,60,000 13.01.2015 4 Machetti Total 3,00,000 48,00,000
The company took the transfer of the above shares on record without obtaining form FC-TRS duly acknowledged/certified by the AD bank thereby contravening Regulation 4 of Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 notified vide Notification No. FEMA 20/RB-2000 dated May 3, 2000 as amended from time to time. The period of contravention ranges from 1 year 29 days to 1 year 10 months 12 days approximately.
3. (a) The applicant was given an opportunity for personal hearing vide Reserve Bank’s letter No. HY.FE.FID/588/14.66.003/2016-17 dated September 16, 2016 for further submission in person and/or producing documents, if any, in support of the application. (b) The applicant appeared for personal hearing on September 22, 2016 during which Shri Rachapoodi Venkata Nagendra Murali Mohan, Director & CEO and Shri B. Prabhakara Rao- Manager of the company represented the applicant. The applicant admitted the contraventions for which the compounding has been sought. During the FED M/s. Provigil Surveillance Limited CA No. HYD 144 personal hearing it was submitted that the company had inadvertently not reported, assuming that no filings would be required since no foreign exchange was received by them and was neither willful nor with a malafide intention. In view of the foregoing, 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 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 and I hold that the applicant has contravened the following FEMA provisions issued in terms of:- (a) Paragraph 9 (1) (B) of Schedule 1 to Notification No. 20/2000-RB due to delay in submission of Form FC-GPR to Reserve Bank after issue of shares to persons resident outside India and the contravention relates to an amount of Rs.85,98,600/- and the period of contravention is 3 years 3 months 25 days approximately.
(b) Regulation 4 of Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India), Regulation, 2000 read with A.P (DIR Series) Circular No. 63 dated April 22, 2009 for taking on record the transfer of shares from resident to non-resident by the company without obtaining AD bank acknowledged copy of FC- TRS. The amount of contravention is Rs 48,00,000/- and period of contravention ranges from 1 year 29 days to 1 year 10 months 12 days approximately.
5. 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..53,810/- (Rupees Fifty Three Thousand Eight Hundred Ten Only) will meet the ends of justice.
FED M/s. Provigil Surveillance Limited CA No. HYD 144
6. Accordingly, I compound the admitted contraventions namely, the contraventions of Regulation 4 and Paragraph 9 (1) (B) 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.53,810/- (Rupees Fifty Three Thousand Eight Hundred Ten 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 twenty seventh day of September 2016
Sd/- (P. K. Raut) General Manager
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