IN THE HIGH COURT OF ANDHRA PRADESH :: AMARAVATI it WEDNESDAY ,THE SEVENTH DAY OF MAY TWO THOUSAND AND TWENTY FIVE o PRESENT THE HONOURABLE MS JUSTICE B S BHANUMATHI CIVIL MISCELLANEOUS SECOND APPEAL NO: 7 OF 2015 Appeal under Section 35 of the Foreign Exchange Management Act, 1999 against the Order dated 16.04.2015 in Appeal No. 100/2011 passed by the Hon'ble Appellate Tribunal for Foreign Exchange, New Delhi and grant waiver of pre-deposit of penalty and direct the Appellate Tribunal to hear the appeal on merits without insisting on pre-deposit of penalty. Between: M/s. Bathina Technologies (India) Ltd., (represented by its Managing Director), Flat No.303, Shri Lakshmi Plaza Apartments, MIG-24, Lawson Bay Colony, Visakhapatnam,Andhra Pradesh ...Appellant AND Special Director of Enforcement, Directorate of Enforcement, Ministry of Finance, 6th Floor, Loknayak Bhavan, Khan Market, New Delhi-110 003 ...Respondent I.A. NO: 1 OF 2015fCMSAMP. NO: 12 OF 20151 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to stay all further proceedings pursuant to the order dt. 16.04.2015 of the Appellate Tribunal for Foreign Exchange, New Delhi passed in Appeal f * No.100/2011 of the Hon'ble Appellate Tribunal for Foreign Exchange', pending disposal of the appeal. , f 4 - ' • >^ynsel for the Appellant: SRI. C V NARASIMHAM ' 'W Cdtihsel for the Respondent: Counsel for Enforcement Directorate) The Court made the following: / - -m. . -i : V SRI JOSYULA BHASKARA RAO (Standing V’ APHC010778192015 IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI [3311] (Special Original Jurisdiction) Wednesday, the Seventh day of May, two thousand and twenty five Present The Hon’ble Ms. Justice B. S. Bhanumathi Civil Miscellaneous Second Appeal No.7 of 2015 Between: M/s. Bathina Technologies (India) Ltd., ...Appellant and Special Director of Enforcement Counsel for the appellant; ...Respondent I.C. V. Narasimham Counsel for the respondent: I.Josyula Bhaskara Rao (S.C. for E.D.) The Court made the following: 2 BSB, J C.M.S.ANo.7of2015 . JUDGMENT: This appeal is filed under Section 35 of the Foreign Exchange Management Act, 1999 (in short “the FEMA”), against the order, dated 16.04.2015, in Appeal No.lOO of 2011 on the file of the Appellate Tribunal for Foreign Exchange, New Delhi. The case of the appellant is, briefly, as follows: The appellant is a software company engaged in the business of development of customised voice automation software. The agreement, dated 10.04.1999, was signed between the appellant and M/s Matsai Technology Inc., Canada in this regard in the name of M/s. Ammanna Technologies Corp. which was acquired by the appellant. The agreement contained a clause that the product shall meet the specifications provided in the electronic data format and the final payment will be subject to testing and certification by the end users in the specified environment. The appellant made 11 exports valued at USD 5,325,000 during 1999-00, 2000-01 and 2001-02 and realised an amount of USD 130,604/- during the year 2000. Since the software exported by the appellant was not compatible with the requirement of the buyers because of the changes made by Microsoft in the Windows operating system and consequently the software did not meet the testing and certification by the end user, they did not release the balance payment. The appellant wrote several letters / reminders to the buyers requesting for grant of time so that improvements / modifications could be carried out by the appellant. The appellant failed to get the payment despite necessary and bona fide desire to supply the software to the satisfaction of the buyer due to their different operating systems and environment. Floping to rectify the defects, the appellanthad taken extension from RBI from time to time and in the ETX form submitted to 2. a. 3 BSB, J C.M.S.ANo.7of 2015 1 v> the authorised dealer also, it was clearly mentioned by the appellant that the payment was subject to certification by the end Thereafter, the appellant stopped the exports to and through the distributor. As the company had no income since the year 2003 and became sick, the operations were stopped since then. The company accumulated loss of Rs. 28,11,11,013/- as on 2013-14. The appellant was legally not entitled to recover the balance amount due to fulfilment of the stipulation in the agreement as per which only after certification regarding suitability of the software supplied, the payment could have been released. 3-' user. non- b. The respondent issued a show cause notice vide F.No.T-4/06- HYD/2009, dated 16.12.2009, to the appellant company and Sri Veerabhadra Rao Bathina, its Chairman and Managing Director basis of the complaint by Assistant Director, E.D., Hyderabad, under Section 16 (3) of the FEMA dated 18.11.2009 alleging that the was engaged in the export of software to M/s. Matsai Technologies Inc., Canada and had exported software of value USD 53,25,000 but had realized only USD 130,634 and the balance amount of USD 51,94,366 on the company was outstanding. The statement of Sri V. Rao Bathina, Chairman and Managing Director of the company, was recorded stating that time was sought on behalf of the noticees on several occasions; that the appellant from an order respondent had given several call notices to the 11.01.2011 to 10.03.2011; and that as there is no response was passed on 28.06.2011 by the Adjudicating Officer, imposing penalty of rupees five crores on the company and rupees Chairman and Managing Director. one crore on it’s c. Aggrieved by the same, Appeal No. 100 of 2011 the company and Appeal No. 101 of 2011 was preferred by its Chairman was preferred by 4 BSB, J C.M.S.ANo.7of 2015 and Managing Director before the Appellate Tribunal for Foreign Exchange, New Delhi. In those appeals, separate applications for stay and waiver of pre-deposit of penalty were moved by the appellants. The appellants filed copies of the relevant documents and decisions of various forums holding that when the invoice value was not due legally to a person, he cannot be charged for non-realisation of the export proceeds. During the course of personal hearing, the appellant filed copies of notarised affidavits with details of turnover and loss of the company during the period from 2010-11 to 2013-14. The auditors' report clearly shows that the company has incurred loss and is not earning anything and consequently filing nil returns. The appellant had a very poor financial condition and not in a position to deposit the amount of penalty imposed. Further, they have a prima facie case and balance of convenience in their favour. They would suffer irreparable loss if the penalty is not completely waived. The appellant prayed to grant stay of the order of penalty. The legal consultant has opposed the appeals stating briefly as 3. follows: The appellant did not take desired and adequate steps to recover the amount of export proceeds. The copies of letter filed only show that the appellant had requested for time from the buyer and did not make claim for the balance amount. The copy of the agreement has not been filed showing that there was such a stipulation as has been claimed by the appellant. No proof was filed showing that the company has stopped operating. Had there been a condition that the payment would be released only on certification of goods supplied to the satisfaction of the buyer, there was no occasion for release of part payment of USD 130,604. Despite affording adequate opportunities, the appellant did not BSB, J C.M.S.A No.7of2015 choose to contest the adjudicating proceedings. They have no prima facie case and there financial position is not in such a bad shape to deposit the amount of penalty imposed. Both the cases were heard together by the Tribunal and a common order was passed. The Tribunal observed that the adjudicating proceedings were held in the absence of the appellant and that the appellant had not filed any objection and kept on demanding time, and failed to place their version before the Adjudicating Officer. It noted that the appellant had not filed the documents of the agreement or the communication from the buyer refusing the payment for compatibility or the correspondence made to RBI. Further, the Tribunal noted that the question whether Section 7 of FEMA is not attracted as the payment to the appellant had neither became due or accrued; and the details of the efforts made by the appellant to supply the software to the buyer will have to be examined / evaluated in detail at the time of final hearing. It was also noted that whether the penalty imposed is excessive and against law will have to be analysed; and that on the basis of the papers filed, there is substance in the argument that the financial condition of the appellants is not such wherein they may be directed to deposit the entire amount of penalty imposed against both of them. The Tribunal noted that without going into merits of the case at that juncture, it found that the appellants have an arguable case. With these observations, relying on the decisions in Benara Valves Ltd Vs. Commissioner of Central Excise^ and Monotosh Saha Vs. Special 4. non- '(2006) 13 see 347 6 BSBJ C.M.S.A No.7 of 2015 Director, Enforcement Directorate & Another^ the Tribunal the following order; passed “Consequently, the applications for stay and waiver of pre-deposit of penalty are disposed of accordingly. Realization of penalty imposed against both the appellants shall remain stayed during the pendency the instant appeals provided the appellants deposit 10% of of the amount of penalty imposed against each of them individually and further furnish a bank guarantee for the balance 90% within a period of 30 days from the receipt copy of this order with the Enforcement of the Directorate. 5. Aggrieved by the said order, the company filed this civil miscellaneous second appeal, while reiterating the contentions earlier noted, further contending that tbe Appellate Tribunal, granting stay, erroneously put the terms for deposit of the furnishing bank guarantee as aforesaid, in spite of finding that the adjudicating proceedings were held in the absence of the appellant; that the appellants have arguable case in the appeals; and that there is the substance in the argument of the appellants about their financial condition. The appellant raised the substantial question of law whether the Tribunal is right in law in putting those conditions to grant stay of the impugned order of the Adjudicating Officer pending hearing of the appeal in the facts and circumstances of this while rightly amount and precarious case. 6. A counter affidavit of the respondent was filed here reiterating the facts and contentions stated by it already noted above and opposing ' (2008) 12 see 359 = 2008 (11) SeALE 603 7 C.M.S.A No.7 of 2015 appeal denying the contents / allegations in the appeal and further stating that the appellant has not made out any ground to interfere with the order under appeal and that the appeal was filed only to circumvent the directions in the order under the appeal. 7. Before proceeding further, it is apt to excerpt the provision of law relevant to the issue. Section 19 of FEMA deals with appeal against penalty imposed by the Adjudicating Authority and also obligates the appellant to deposit the amount of penalty, conferring discretion to the appellate authority to dispense with it subject to conditions as are fit to secure realisation of penalty. this “19. Appeal to Appellate Tribunal:-(1) Save as provided in sub-section (2), the Central Government or any person aggrieved by an order made by an Adjudicating Authority, other than those referred to in sub-section (1) of section 17, or the Special Director (Appeals), may prefer an appeal to the Appellate Tribunal; Provided that any person appealing against the order of the Adjudicating Authority or the Special Director (Appeals) levying any penalty, shall while filing the appeal, deposit the amount of such penalty with such authority as may be notified by the Central Government: Provided further that where in any particular case, the Appellate Tribunal is of the opinion that the deposit of such penalty would cause undue hardship to such person, the Appellate Tribunal may dispense with such deposit subject to such conditions as it may deem fit to impose so as to safeguard the realisation of penalty.” 8 BSB, J C.M.S.ANo.7of2015 8. The learned counsel for the appellant sternly contended that since the right to receive the amount would arise only on compliance of the condition in the agreement, it is ex-facie incorrect to state that the appellant has not taken steps to realise the balance amount to fall within the ambit of the alleged violations of law cited in the show cause notice and that in spite of the correspondence with the user seeking time to supply the product as per the specification, it cannot be said that the appellant had not taken any action for realisation of the amount since it is only on supply of the software as per the user’s requirement, the question of payment would arise and not before that. He further submitted that the appellate Court, having noted that the appellants have arguable case and that their financial condition is also fragile, it is not just to put conditions to grant stay. In this regard, he placed reliance on various decisions which are as follows; In Nimesh Suchde, Prop Siddharth Polymers Vs., Union of India and others^ the decision of the Supreme Court in Monotosh Saha Vs. Special Director, E.D. and another (2 supra) was referred as follows: a. "11. Two significant expressions used in the provisions are "undue hardship to such person" and "safeguard the realization of penalty". Therefore, while dealing with the application twin requirements of considerations i.e. consideration of undue hardship aspect and imposition of conditions to safeguard the realization of penalty have to be kept in view. ^2009 (7) TMI 1328 9 C.M.S.A No.7 of 12. As noted above there are two important expressions in Section 19(1). One is undue hardship. This is a matter within the special knowledge of the applicant for waiver and has to be established by him. A mere assertion about undue hardship would not be sufficient. It was noted by this Court in S. Vasudeva v. State of Karnataka and Ors., [1993 (3) SCC 467], that under Undue hardship" is Indian conditions expression normally related to economic hardship. "Undue" which means something which is not merited by the conduct of the claimant, or is very much disproportionate to it. Undue hardship is caused when the hardship is not warranted by the circumstances. 13. For a hardship to be “undue" it must be shown that the particular burden to have 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. 14. The word "undue" adds something more than just hardship. It means an excessive hardship or a hardship greater than the circumstances warrant." In Priya Shah Vs., Enforcement Directorate, New Delhi, 2009 SCC Online Del 1583, the High Court of Delhi, dealing with a matter under FEMA, held as follows: b. “5. The Supreme Court in Monotosh Saha v. Special Director, Enforcement Directorate, [(2008) 12 SCC 359], observed that "undue hardship" is a matter within the special knowledge of the applicant for waiver and has 10 BSB, J C.M.S.A No.7 of 2015 to be established by him. A mere assertion about undue hardship would not be sufficient. "Undue" means something which is not merited by the conduct of 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. The word "undue" adds something more than just hardship. It means an excessive hardship or a hardship greater than the circumstances warrant.” “8. As held by the Delhi High Court in Ess Ess Metals Enterprises Vs. CEGAT, [2003 (158) ELT 810], that while considering an application for dispensing with the deposit, the appellate authority is not required to embark detailed inquiry to find out whether the stand of the upon appellant is on a strong footing or not. What is required to be considered at that juncture is as to whether the appellant has made out a prima facie case in his favour; the balance of convenience qua the deposit or otherwise lies in whose favour and whether the deposit of the duty demanded is likely to cause undue hardship to the appellant. 11 BSB, J C.M.S.ANoJof 2015 In Virender Kumar Yadav Vs. Union of India'^, the Delhi High Court, dealing with a case under FEMA, held as follows at paragraphs 19 and 20: c. “19. From various judicial pronouncements on this issue, the position, which emerges is that the Tribunal while considering any application for waiver of deposit is to take into account firstly the existence of a prima facie case. In case, it is found that a party has a very strong prima facie case, and / or where the errors in the impugned order are writ large on the record, in such a case, it would be competent for the Court in the exercise of its jurisdiction to grant waiver of pre-deposit since in such a case requiring a pre-deposit itself would amount to "undue hardship". There is no denying of the fact that while dealing with the application for stay it is neither desirable nor proper for the Tribunal or any other authority to embark upon a detailed inquiry to find out whether the stand of the appellant before it is correct or not because expression of any opinion on merits at that juncture, without full-fledged hearing and consideration of entire material, is likely to cause prejudice to either side. But at the same time, the authority concerned is required to consider whether with reference to the material placed before it, a prima facie case for grant of stay is made out or not and the balance of convenience lies in whose favour. ^2009 (8) TMI 622 12 BSB, J C.M.S.A No.7 of 2015 20. What is a prima facie case? It is well settled that it refers to an arguable or triable case. The Tribunal once if comes to the conclusion on perusal of the pleadings, documents and on hearing of the parties that there is a good prima facie case to be considered, the next step in exercise of discretion is determining the quantum of waiver to be granted. In determination of the quantum of waiver, factors. such as, balance of convenience, financial hardship of the parties, its capacity to pay or secure the amount and irreparable loss are to be considered. The said discretion is to be exercised in accordance with well settled principles for exercise of judicial discretion.” d. In B. Hima Bindu Vs., Commissioner, Customs, CE and Service Tax, Hyderabad®, the High Court of Andhra Pradesh, while dealing with an order relating to condition for pre-deposit in an application for stay in an appeal in the Customs Act, 1962, summing up the essentials, held as follows: “29. Following principles should be borne in mind while considering applications for stay, or for dispensing with the requirement of pre-deposit, under Section 35F of the Central Excise Act or under Section 129E of the Customs Act, or other similar provisions: (1) the applications for stay should dot be disposed of in a routine manner unmindful of the consequences flowing from the order requiring the appellant to deposit the full or a part of the = 2016 (4) TMI 12 13 demand; (2) three aspects to be focussed upon, while dealing with the applications for dispensing with pre deposit, are (a) prima facie case, (b) balance of convenience, and (c) irreparable loss; (3) interim orders ought not to be granted merely because a prima facie case has been shown; (4) the balance of convenience must be clearly in favour of making an interim order, and there should not be the slightest indication of a likelihood of prejudice to the interest of public revenue; (5) while dealing with such applications, the twin considerations are the ‘undue hardship’ which the applicant would suffer if his request for waiver (either wholly or partially) of pre deposit of duty, interest and penalty is not acceded to, and the need to safeguard the 'interests of revenue’ (6) when the Tribunal decides to grant full or partial stay, it is imperative that it imposes such conditions as may be necessary to safeguard the interests of revenue; and (7) an appellate Tribunal, being a creature of the Statute, should be guided by the conditions stipulated in the statutory provision while exercising powers expressly conferred or those incidental thereto. (M/s. Sri Chaitanya Educational Committee, Poranki, Vijayawada (Judgment of A.P. High Court Division Bench in CEA No.301 of 2010 dated 19.01.2011. In M/s. Kone Elevator India Private Ltd Vs., Commissioner of Commercial Tax U.P., Lucknow® while dealing with a petition for e. •^2020 (12) TMI 133 14 BSB, J C.M.S.A No.7of2015 mi waiver of pre-deposit in a matter of commercial tax appeal, it was held by the Allahabad High Court as follows: “A perusal of the order dated 28.10.2020 reveals that while deciding the stay application the Tribunal recorded that at that stage prima facie case was made out and direction for deposit of the entire amount would cause undue financial hardship to the appellant, however, despite recording the said proceeded to stay only 90% of the tax. It is well settled that while deciding the waiver application, the authority concerned has to record a finding as to whether a prima facie case is made out or not and whether the deposit would entail undue financial hardship. It is also well settled that the phrase 'prima facie case' would include even an arguable case, I am unable to understand as to why and what circumstances did the Tribunal direct the deposit of 10% of the amount after having recorded that a prima facie case was made out and the deposit would cause financial hardship to the revisionist. I have no hesitation in holding that the order dated 28.10.2020 is wholly arbitrary, illegal and contrary to the law laid down in catena of judgments in the case of ITC vs. Commissioner Appeals (MANU/UP/0515/ 2003; 2005 (184) E.L.T. 347), followed in Honda Siel Cars vs. Commissioner of Commercial Taxes, Lucknow [2010 UFTC 1152] and KribhcoShyam Fertilizers Ltd. vs. CST (2009 UPTC 626) as well as the 15 BSBJ C.M.S.ANo.7of 2015 decision in Pennar Industries Limited v. State of Andhra Pradesh (MANU/SC/0160/2009 ;2009 Vol. (39) NTN Page 126).” In Vaseem Iqbal Kapadia Vs., Union of India^ the Bombay High Court held under the facts similar to case on hand as follows: f. “3. In the order under challenge at more places than one the Tribunal has observed that the main appeal arising out of the adjudication dated 22.1.2010 and the subsequent addendum dated 15.2.2010 raises several questions of facts and law. After noting the rival contentions, the Tribunal in paragraph 7 has observed that no final view can be expressed at the stage of grant of stay but the grounds would require in-depth consideration. Apart from the violation of principles of natural justice, the other aspects on merits also require deeper scrutiny. The Tribunal has observed that it is convinced that the appellant has an arguable case. In the circumstances, we do not think why the conditional order was passed. The direction to deposit 10% of the total amount of penalty and to furnish bank guarantee for the balance 90% of the sum adjudicated and demanded, in effect and in substance means denial of stay. This is clear from the conditions that have been imposed. Once the case is arguable and the Tribunal is required to consider several grounds and in-depth, then we do not see justification for imposition of such conditions. ^2015(7) TMI 301 16 BSB, J C.M.S.A No.7 of 2015 \ A f 4. Without expressing any opinion on the rival contentions and particularly on the merits of the controversy, we allovy this appeal. There will be an unconditional waiver of the pre-deposit and stay during the pendency of the appeal before the Tribunal. The appeal is allowed accordingly. There will be no order as to costs.” In ND Investments Vs., Union of India®, the High Court of Bombay, dealing with a case under FEMA, held as follows: g- “11. ... The Tribunal must consider as to whether the provisions of law and particularly the Regulations have indeed been complied and as claimed substantially though not strictly. That is a matter which must be gone into by the Tribunal and on merits. However, in the given facts and circumstances, the Appellate Tribunal should have imposed reasonable conditions and exercised its discretion judiciously and not gone by any formula. It should have, even at the prima facie stage, satisfied itself as to whether there is any breach or violation of law. If that breach and violation is serious enough and requiring imposition of penalty, whether there is any discretion in the matter of imposition of penalty. Further, the settled principles enabling imposition of penalty have to be read into the subject legal provisions or they are not permitted to be so read. When these are vital and crucial questions raised, then, the Tribunal should have imposed 2015 (319) E.L.T. 53 (Bom.) 17 conditions which would enable the parties to prosecute their appeals on merits. Imposition of a condition and of cash deposit of 40% of the amount awarded and imposed as penalty and giving a bank guarantee of 60% for the balance, in the given facts and circumstances and peculiar to these cases, does not meet the ends of justice. Some of the appellants are individuals and they have raised a plea that at the time of finalisation of the transactions, they were not associated with the company. Rather they were earlier or later associated, not necessarily with the company incorporated and established in India, but abroad. Such and other issues, therefore, should have enabled the Tribunal to consider the cases of individuals and on their own merits, even for granting partial or total waiver. Since a blanket condition and general order has been passed applicable to all the appellants that we are of the view that the impugned order deserves to be interfered with.” In Union of India Vs. Adani Exports Ltd ,® the Supreme Court, dealing with a case under the Customs Act, 1962 held that in a petition for dispensation of pre-deposit, three aspects viz., prima facie case, balance of convenience and irreparable loss are to be focused. The Tribunal highlighted all these relevant aspects while rejecting the prayer for dispensation of pre-deposit. The Supreme Court found fault with the High Court in going into the merits and expressing its views and thereafter remitting the matter to the Tribunal. However, as the Tribunal h. *2007 (11)TMI 18 18 BSB, J C.M.S.A No.7 of 2015 already passed a consequential order, the Supreme Court set aside the orders of the High Court and the Tribunal and directed the Tribunal to hear the appeal day to day without insisting pre-deposit and the parties to appear before the Tribunal on a specified date. The concerned party was directed to file an undertaking before the adjudicating authority to liquidate the demands, if any, sustained by the Tribunal subject, of course, to the right of appeal, if any, within the specified period. In M/s. Union Enterprises and another Vs., Union of India and others’’” the Calcutta High Court held that the Tribunal must draw a distinction between an existence of a strong prima facie case and making out of an arguable case as in case of former total waiver should be granted though in case of later, the discretion is to be exercised rationally, reasonably and with judicial mind. The High Court directed the Tribunal to dispose of the petition afresh. On the other hand, the respondent submitted that financial hardship or indebtedness is not ‘undue hardship’. He relied on the decision of the Supreme Court in S. Vasudeva wherein dealing with Section 20(1 )(b) of the Urban Land (Ceiling and Regulation) Act, 1976, it was held that this Section vests power in the State Government to sanction sales of excess vacant lands with or without building thereon and the State Government can only exempt such excess vacant land from being acquired by it. It was further held that Section 20(1 )(b) speaks of undue hardship caused on account of application of the provisions of Chapter III to person holding excess vacant land and further held as follows: I. 9. a. 11 Vs. State of Karnataka and others 2014(5) TMI 93 (1993) 3 see 467 19 “58. ... the hardship spoken of there is obviously one related to the user of the land. In fact, it is difficult to understand the precise purpose for which clause (b) has been enacted and the meaning of the expression "undue hardship" there. We are left only to speculate on the subject. The speculation itself may not be valid. ... However, all lands in excess of the ceiling limit may not strictly be necessary for such user, even if the user is in the public interest. Nevertheless, the withdrawal of a part of the land found to be in excess may cause an avoidable hardship to the landholder which may be disproportionate to the benefit that is to accrue to the public on account of such withdrawal. The excess of land may be meagre or the severance of such excess land itself may result in unnecessary hardship. The hardship further has to be undue and not merely an ordinary hardship which is bound to be caused on account of the application of the Act to every holder of the excess vacant land. The undue hardship must be one which cannot be avoided except by granting a relief of exemption as contemplated by the said provision. The relief from financial hardship or from indebtedness to the landholder of such land is alien both to the object and the scheme of the Act. Even the debates in the Parliament do not refer to financial hardship or to the power of the State Government to exempt the land to permit its transfer on that account. To hold that indebtedness and financial hardship would entitle the landholder to get exemption for sale of the excess vacant land in his 20 BSB, J C.M.S.A No.7 of 2015 possession is to place the holders of land with debts in an advantageous position as against those who were unwise enough to manage their affairs with financial discipline. The classification of the owners of land for this purpose between debtors and non-debtors is itself irrational and has no plausible nexus with the object of the Act. Such a classification is, therefore, discriminatory and violative of Article 14 of the Constitution. ...” He also referred to the decision of the Supreme Court in Benara Valves (1 supra), wherein dealing with the Central Excise Act, 1944, regarding pre-deposit issue, it was held as follows: b. “6. Principles relating to grant of stay pending disposal of the matters before the forums concerned have been considered in several cases. It is to be noted that in such matters though discretion is available, the same has to be exercised judicially. 7. The applicable principles have been set out succinctly in Siliguri Municipality v. Amalendu Das, [(1984) 2 see 436] and Samarias Trading Co. (P) Ltd. v. S. Samuel, [(1984) 4 SCC 666] and CCE v. Dunlop India Ltd.,[(1985) 1 SCC 260]. 8. It is true that on merely establishing a prima facie case, interim order of protection should not be passed. But, if on a cursory glance, it appears that the demand raised has no legs to stand on, it would be undesirable to require the assessee to pay full or substantive part of the demand. Petitions for stay should not be disposed of in a routine manner unmindful of the consequences flowing 21 from the order requiring the assessee to deposit full or part of the demand. There can be no rule of universal application in such matters and the order has to be passed keeping in view the factual scenario involved. Merely because this Court has indicated the principles that does not give a licence to the forum / authority to pass an order which cannot be sustained on the touchstone of fairness, legality and public interest. Where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizen's faith in the impartiality of public administration, interim relief can be given.” A reading of Section 19 of FEMA shows that the considerations for dispensing with pre-deposit under this provision is different from the similar relief under the other enactments relating to which decisions were cited by both the parties. Section 19 gives discretion to the 10. appellate authority to dispense with the pre-deposit, if such deposit would cause undue hardship to such person, subject to such conditions as it may deem fit to safeguard the realisation of penalty. Whereas, in the other enactments, the considerations are undue hardship and safeguard the interests of revenue. The ‘undue hardship’ also has different connotation with reference to the Land Ceiling Act and in the context of the provisions thereunder it was understood that indebtedness and financial hardship of the land holder are not ‘undue hardship’. The same meaning was not given when Section 19 of FEMA was dealt with. It was held that ‘undue hardship’ is normally related to economic hardship. The Delhi High Court, in Virender Kumar Yadav (4 supra) went to the extent of saying that in case, it is found that a party 22 BSB, J C.M.S.A No.7 of 2015 has a very strong prima facie case, and / or where the errors in the impugned order are writ large on the record, in such a case, it would be competent for the Court in the exercise of its jurisdiction to grant waiver of pre-deposit since in such a case requiring a pre-deposit itself would amount to ‘undue hardship’. The Calcutta High Court in M/s. Union Enterprises and another (10 supra) has taken the similar view by making a distinction between a strong prima facie case and making out of an arguable case as in case of former, total waiver should be granted though in case of later, the discretion is to be exercised rationally, reasonably and with judicial mind. Thus, total waiver of pre-deposit is not ruled out in certain cases and even in case of arguable case, there is discretion which shall be reasonably exercised in the facts and circumstances of such case. In the case on hand, the appellate Court found that there is an arguable case. Since the appellant contends that the amount becomes payable under the contract only if the end user certifies, but the software supplied could not satisfy the end user as there was change in the software in the devices of the end user, it is a serious question whether the appellant got the right to recover the amount and failed to recover the same in spite of accrual of right of receiving payment from the buyer, so as to attract the allegations. It is only on the ground that documents were not filed, the case of the appellant was not taken as a strong case. The contention of the appellant is not rejected on merits. Here, before this Court, the documents relating to profit and loss statement of the appellant for the financial years from 2015-16 to 2022- 23 showing income as ‘nil’ and the income tax returns of the Managing Director of the appellant for the financial years from 2019-20 to 2023-24 describing as negligible were filed to show that the company has 11. 23 BSB, J C.M.S.ANo.7of 2015 become sick and has no financial capacity to comply the directions in the impugned order. The appellant filed the medical record showing the health condition of the Managing Director of the appellant. These documents support the contention that imposition of onerous conditions to hear the appeal is undue hardship to the appellant. The appeal could have been heard on merits in short time, instead of directing the entire amount of penalty to be met by way of deposit of cash and furnishing bank guarantee of different proportions. Since, it is a fit case to dispense with the pre-deposit of the penalty amount, the impugned order is liable to be set aside. But, to safeguard realization of the amount of penalty, the appellant shall execute an undertaking before the appellate authority that the amount of penalty would be paid in the event of confirmation of penalty by the appellate authority within eight (8) weeks from such order, however, subject to other legal remedies available against such order. Accordingly, the appeal is liable to be allowed. In the result, the appeal is allowed. There shall be no order as to costs. Pending miscellaneous petitions, if any, shall stand closed. 12. Sd/- S.V.S.R.MURTHY JOINT REGISTRAR //TRUE COPY// SECfrbN OFFICER To, 1. The Appellate Tribunal for Foreign Exchange, 15^'^ Floor, Flindustan Times Flouse, K.G Marg, New Delhi -110001 2. One CC to Sri. C V Narasimham Advocate [OPUC] 3. One CC to Sri. Josyula Bhaskara Rao ( Standing Counsel for Enforcement Directorate) Advocate [OPUC] 4. Three CD Copies Stu HIGH COURT DATED:07/05/2025 JUDGMENT CMSA.No.7of 2015 ALLOWING THE CMSA