The Appellate Tribunal under SAFEMA at New Delhi has held that for contravention of Section 3(a) of the Foreign Exchange Management Act (FEMA), 1999, there must be evidence showing that the person actually dealt in or transferred foreign exchange to a person not being an authorised person. Hence, mere applications, notarized papers, police verification, or letters expressing intention are insufficient absent proof of actual remittance/transfer.
The Tribunal clarified that a finding of contravention under Section 3(a) cannot rest on assumptions, presumptions, or conjecture; it must be supported by corroborative evidence such as bank statements or other material proving the foreign exchange transaction. The Tribunal therefore allowed the appeals of Surendra Satish Timblo, Radha Satish Timblo, and Rohan Satish Timblo, set aside the impugned order of the Adjudicating Authority, and dismissed the Department’s appeal for enhancement of penalty.
The Division Bench comprising Justice Munishwar Nath Bhandari (Chairman) and G.C. Mishra (Member) reproduced Section 3(a) of FEMA and treated the core requirement of the provision as dealing in or transfer of foreign exchange or foreign security to a person not being an authorised person. It held that, to make out a case under Section 3(a), the foundation must lie in proof of remittance or transfer of foreign exchange.
The Tribunal found that mere preparation of applications, notarization, and even police verification could not by themselves establish remittance of foreign exchange in contravention of Section 3(a) of FEMA. At best, those materials could show preparation to apply for foreign citizenship.
The Tribunal specifically observed that the Department had not produced bank statements or similar corroborative material to prove actual remittance, though such evidence could have been collected. On the Singapore trust allegation, the Tribunal held that even assuming the existence of the two letters dated 12.11.2012 and 21.12.2012, no material had been produced to prove any actual transfer of foreign exchange in furtherance of those letters. The Tribunal therefore concluded that the allegations rested on hypothesis and presumption rather than proof.
Briefly, the appeals were filed by Surendra Satish Timblo, Radha Satish Timblo, and Rohan Satish Timblo against penalties imposed on them, and one appeal was filed by the Enforcement Directorate seeking enhancement of penalty. The Adjudicating Authority had imposed penalties of Rs. 66.55 lakhs on Radha Timblo, Rs. 2.02 crores on Rohan Satish Timblo, and Rs. 55.45 lakhs on Surendra Satish Timblo for alleged contravention of Section 3(a) of the Foreign Exchange Management Act, 1999.
The show cause notice alleged that USD 3,00,000 equivalent to Rs. 1,66,35,000 and USD 2,50,000 equivalent to Rs. 1.38 Crores were transmitted/dealt with in contravention of Section 3(a), and that EURO 7,00,000 equivalent to Rs. 5.04 Crores was remitted by Rohan Satish Timblo in contravention of the same provision.
The first limb of the allegations related to applications for citizenship of St. Kitts and Nevis made in June 2012, where the appellants were alleged to have shown investment/family assets as source of funds and to have made donations/investments in the Sugar Industries Diversification Fund (SIDF). Their citizenship was granted in April 2013 and later cancelled in 2017. The second limb of the allegations related only to Rohan Satish Timblo, who was alleged to have settled an overseas trust named Colares Trust in Singapore on 01.09.2011 and to have remitted EURO 100,000 on 12.11.2012 and EURO 600,000 on 21.12.2012.
The Enforcement Directorate relied principally on citizenship application forms, notarization, police verification material, and two letters allegedly showing intended remittance of EURO 100,000 and EURO 600,000. The appellants denied having applied for citizenship, denied the inference drawn from police verification, and contended that no evidence of actual remittance of foreign exchange had been produced. Rohan also denied the letters and the signatures attributed to him.
Appearances:
Advocates L.S. Shetty, N.L. Shetty, Juhi Masan, and Vijay, for Appellants
NA, for Respondent
