The Calcutta High Court, exercising appellate jurisdiction under Section 35 of the Foreign Exchange Management Act, 1999 (FEMA), has partly allowed statutory appeals filed by Lords Polymer (I) Private Limited and its Director, setting aside a direction of the FEMA Appellate Tribunal requiring a pre-deposit of ₹2.20 crore as a condition to hear the appeal. The Court held that once the Tribunal had recorded a finding of “poor financial condition” and “undue hardship”, it committed a jurisdictional error by treating the 10% ceiling under the third proviso to Section 19(1) of FEMA as a mandatory minimum, thereby rendering the right of appeal illusory.
The proceedings arose from FEMA adjudication concerning non-repatriation of export proceeds of about ₹21.70 crore relating to iron ore exports dating back to 2008, culminating in a penalty of ₹22 crore imposed by the Adjudicating Authority. In appeal, the appellants sought a complete waiver of pre-deposit under the second proviso to Section 19(1), placing uncontroverted material to show that the company was defunct, classified as an NPA, and had no liquid assets. Despite recording these facts, the Tribunal, by order dated April 23, 2025, waived 90% of the penalty but still directed a deposit of ₹2.20 crore.
While deciding the appeals, the Division Bench comprising Justice Rajarshi Bharadwaj and Justice Uday Kumar examined the statutory scheme and precedent. The Court reiterated that “undue hardship” means a burden out of proportion to the requirement, and cautioned—relying on Monotosh Saha v. Special Director, ED—that appellate remedies must not be rendered illusory. The Court found a “vice of internal contradiction” in the Tribunal’s approach: acknowledging indigence yet insisting on a deposit that was impossible to make. It clarified that the 10% figure is a cap, not a floor, and that the Tribunal must meaningfully exercise discretion, including by considering alternative safeguards (such as bonds or guarantees) to protect revenue without blocking access to justice.
Accordingly, the High Court set aside the ₹2.20 crore pre-deposit direction, substituted it with a token deposit ₹2,00,000 by the company and ₹50,000 by the Director treated compliance as sufficient under Section 19(1), and directed the Tribunal to hear the main appeal on merits expeditiously. There was no order as to costs.
Appearances:
For the Appellants – Advocate Nilotpal Chowdhury and Pallavi Roy.
For the Respondent – Advocate Arijit Chakrabarti, Debsoumya Basak, and Swati Singh.
