Ketan V. Parekh vs Special Director,Dir.Of ...

2. In these appeals prayer has been made for setting aside the order of the Division Bench of the Bombay High Court whereby the applications filed by the appellants for condonation of delay in filing appeals under Section 35 of the Foreign Exchange Management Act, 1999 (for short, `the Act') were dismissed along with the appeals filed against order dated 2.8.2007 passed by the Appellate Tribunal for Foreign Exchange (for short, `the Appellate Tribunal'). Background facts

3. On an information received from the Reserve Bank of India that M/s. Classic Credit Ltd. and M/s. Panther Fincap and Management Services Ltd. had taken loan of 25 lakh shares each of DSQ Industries Ltd. on 1.3.2011 from M/s. Greenfield Investment Ltd, Mauritius and the Indus Ind Bank Ltd with whom M/s. Greenfield Investment Ltd. was maintaining NRE Account had informed that records did not indicate any such transaction, the Directorate of Enforcement, Mumbai conducted enquiries from different sources including Securities and Exchange Board of India, Shri Ketan Parekh, M/s. Integrated Enterprises (I) Ltd., Chennai and Indsec Securities and Finance Ltd. Thereafter, 3 show cause notice dated 23.9.2004 was issued to M/s. Greenfield Investments Ltd., Mauritius, Shri Pravin Guwalewala, Mauritius, Smt. Neena Guwalewala, Mauritius, Shri A. K. Sen, Mauritius, M/s. Classic Credit Ltd., Mumbai, M/s. Panther Fincap and Management Services Ltd., Mumbai, Shri Ketan Parekh, Shri Kartik K. Parekh, Shri Kirit Kumar N. Parekh and Shri Navinchandra Parekh for taking action against them for contravention of the provisions of the Act. After hearing the noticees, the Special Director of Enforcement, Mumbai (for short, `the Special Director') passed order dated 30.1.2006 and, whereby he held that some of the noticees had violated Sections 3(d) and 6(3)(e) of the Act and imposed penalty of Rs.40 crores on M/s. Classic Credit Ltd.; Rs.40 crores on M/s. Panther Fincap and Management Services Ltd.; Rs.75 crores on M/s. Greenfield Investments Ltd.; Rs.80 crores on Shri Shri Ketan Parekh; Rs.12 crores on Shri Kartik K. Parekh; Rs.60 crores on Shri Pravin Guwalewala and Rs.20 crores on Shri A.K. Sen with a direction that they shall deposit the amount within 45 days from the date of receipt of the order.

10. In view of the submissions made above it is respectfully submitted that the applicant/appellant is not in a position to deposit the penalty amount of Rs.12,00,00,000 (Rupees Twelve Crores) imposed in the impugned order. The appellant/applicant has absolutely no means to pay the penalty amount as pre-deposit and such pre-deposit would cause undue hardship to the applicant/appellant."

In the application filed on behalf of M/s. Panther Fincap and Management Services Limited, the following averments were made:

8. In view of the submissions made above it is respectfully submitted that the applicant/appellant is not in a position to deposit the penalty amount of Rs.40,00,00,000 (Rupees Forty Crores) imposed in the impugned order. The appellant/applicant has absolutely no means to pay the penalty amount as pre-deposit and such pre-deposit would cause undue hardship to the applicant/appellant."

5. After hearing the counsel for the parties, the Appellate Tribunal passed order dated 2.8.2007 and directed the appellants to deposit 50% of the amount of penalty with a stipulation that if they fail to do so, the appeals will be dismissed. The relevant portion of that order is extracted below:

6. Shri Ketan Parekh challenged the aforesaid order in Writ Petition No.8385 of 2007 filed in the Delhi High Court on 13.11.2007. The other two appellants, namely, Kartik K. Parekh and Panthar Fincap and Management Services Ltd. filed Writ Petition Nos. 8231 and 8232 of 2007 on 5.11.2007 and prayed for quashing the order of the Appellate Tribunal. After taking cognizance of the judgment of this Court in Raj Kumar Shivhare v. Assistant Director, Directorate of Enforcement (2010) 4 SCC 772, the learned Single 9 Judge dismissed the writ petitions vide order dated 26.7.2010, the relevant portions of which are extracted below:

23. There is another reason why the benefit of Section 14 of the Limitation Act cannot be extended to the appellants. All of them are well conversant with various statutory provisions including FEMA. One of them was declared a notified person under Section 3(2) of the Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992 and several civil and criminal cases are pending against him. The very fact that they had engaged a group of eminent Advocates to present their cause before the Delhi and the Bombay High Courts shows that they have the assistance of legal experts and this seems to the reason why they invoked the jurisdiction of the Delhi High Court and not of the Bombay High Court despite the fact that they are residents of Bombay and have been contesting other matters including the proceedings pending 31 before the Special Court at Bombay. It also appears that the appellants were sure that keeping in view their past conduct, the Bombay High Court may not interfere with the order of the Appellate Tribunal. Therefore, they took a chance before the Delhi High Court and succeeded in persuading learned Single Judge of the Court to entertain their prayer for stay of further proceedings before the Appellate Tribunal. The promptness with which the learned senior counsel appearing for appellant - Kartik K. Parekh made a statement before the Delhi High Court on 7.11.2007 that the writ petition may be converted into an appeal and considered on merits is a clear indication of the appellant's unwillingness to avail remedy before the High Court, i.e. the Bombay High Court which had the exclusive jurisdiction to entertain an appeal under Section 35 of the Act. It is not possible to believe that as on 7.11.2007, the appellants and their Advocates were not aware of the judgment of this Court in Ambica Industries v. Commissioner of Central Excise (2007) 6 SCC 769 whereby dismissal of the writ petition by the Delhi High Court on the ground of lack of territorial jurisdiction was confirmed and it was observed that the parties cannot be allowed to indulge in forum shopping. It has not at all surprised us that after having made a prayer that the writ petitions filed by them be treated as appeals under Section 35, two of the appellants filed applications for recall of that order. No doubt, the learned Single Judge accepted their prayer and the Division 32 Bench confirmed the order of the learned Single Judge but the manner in which the appellants prosecuted the writ petitions before the Delhi High Court leaves no room for doubt that they had done so with the sole object of delaying compliance of the direction given by the Appellate Tribunal and, by no stretch of imagination, it can be said that they were bona fide prosecuting remedy before a wrong forum. Rather, there was total absence of good faith, which is sine qua non for invoking Section 14 of the Limitation Act.

3. REASONS FOR THE DELAY :

3.5 It is submitted that the delay, in filing of the present Appeal has not prejudiced the Respondent in any manner, whatsoever, and, therefore, this Hon'ble Court be pleased to condone the said delay.

3.6 It is, further submitted that the delay of 1056 days in filing the present Appeal was bonafide, unintentional and inadvertent."

25. In view of the above discussion, we hold that the impugned order does not suffer from any legal infirmity.

which means something which is not merited by the conduct of 35 the claimant, or is very much disproportionate to it. Undue hardship is caused when the hardship is not warranted by the circumstances.

For a hardship to be "undue" it must be shown that the particular burden to observe or perform the requirement is out of proportion to the nature of the requirement itself, and the benefit which the applicant would derive from compliance with it.

29. In the result, the appeals are dismissed. Four weeks' further time is allowed to the appellants to comply with the direction given by the Appellate 36 Tribunal, failing which the appeals filed by them shall stand automatically dismissed. The parties are left to bear their own costs.