Wednesday, October 15, 2008

SC DEFENDS PROVISION OF PRE-DEPOSIT OF PENALTY IN FEMA CASES

The Supreme Court has defended the requirement of pre deposit of penalty amount before hearing the appeal of a firm which was accused of acquiring foreign exchange contravening the provisions of the Foreign Exchange Management Act. In this case, Monotosh Saha vs. Special Director, Enforcement Directorate, the firm was imposed a penalty of Rs. 25 lakh. When it moved the appellate tribunal (foreign exchange), it directed the firm to deposit 60 per cent of the penalty amount if it wanted the appeal to be heard. The firm appealed to the Calcutta High Court contending that the order imposed ‘undue hardship’ on it. The high court rejected it. The Supreme Court justified the condition stating that “for a hardship to be undue, it must be shown that the burden is out of proportion to the nature of the requirement and the hardship is greater than the circumstances warrant.” It was not so in this case.

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