Penalty Under FEMA for Non-Issuance of Shares Upheld | Mens Rea Not Needed

Case Details: Jignesh Arvind Shah vs. Joint Director Directorate of Enforcement - [2025] 180 taxmann.com 712 (SAFEMA-New Delhi)[19-11-2025]

Judiciary and Counsel Details

• Balesh Kumar & Rajesh Malhotra, Member
• Ms Gurmeet Bindra, Adv. for the Appellant.
• Pranav Mishra, Adv. for the Respondent.

Facts of the Case

In the instant case, the appellant was promoter-director and Managing Director of company AFTPL from its inception till 2014. Between 2010 and 2012, AFTPL received foreign remittances of Rs. 5.50 crore as share application money but did not issue shares within 180 days or refund amounts.

The RBI declined a proposal to waive/write-off share application money and referred the matter to ED. Pursuant to investigation, a complaint was filed, SCN was issued, and after adjudication, penalty of Rs. 25 lakh was imposed on the appellant.

The appellant filed an instant appeal contending that lapse was unintentional/technical and sought substantial reduction of penalty.

It was noted that since appellant was responsible for the affairs of the company during the relevant period, he was liable for penalty for the aforementioned contravention in terms of Section 42(1) of the FEMA.

Further, it was noted that even argument of the appellant that contravention of FEMA was unintentional could not be accepted as there was nothing in Section which could indicate directly or indirectly requirement of mens rea.

Appellate Tribunal Held

The Appellate Tribunal held that since the appellant resigned from company and ceased to carry out any responsibility towards it, penalty was to be reduced to Rs. 5 lakh.

List of Cases Referred to

• SEBI v. Shriram Mutual Fund [2006] 68 SCL 216 (SC) (para 9).