Foreign Exchange Management Act, 1999 – ss.4, 37A – Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004 – Appellants alleged to have contravened the provisions of s.4 of FEMA, r/w. FEMA Regulations, on the premise that they had acquired and held shares of a foreign entity without the requisite approval and in violation of the statutory framework – Properties seized by the Authorised Officer – Competent Authority held that there was no contravention of s.4, provisions of s.37A were held inapplicable and prayer for confirmation of seizure of assets was rejected – Parallelly, Adjudicating Authority issued show cause notice (SCN) alleging violation of the provisions of FEMA along with allied regulations – A corrigendum was issued to the SCN – Writ petitions were filed by the appellants – The High Court dismissed the writ petitions – Correctness: Held: A prima facie satisfaction was recorded by the Competent Authority that there was no evidence of the appellants being involved in foreign security transactions having any value – Consequently, there did not exist the “reasons to believe” referred to in s.37A(1) – This Court has consistently held that although ordinarily a writ petition against an SCN may not be entertained, however, the said proposition is not an inviolable rule – Interference at the stage of SCN is permissible in exceptional circumstances, such as where the notice suffers from patent lack of jurisdiction, reflects nonapplication of mind, is issued with a pre-determined or premeditated approach, amounts to an abuse of the process of law, or results in a violation of the principles of natural justice – Thus, the rejection of challenge laid by the appellants to the SCN on the ground of non-maintainability was not justified in the peculiar facts of the case at hand – The High Court repeatedly referred to the effect of the seizure order passed by the Authorised Officer u/s.37A of FEMA and the scope of consideration thereof by the Adjudicating Authority while passing the final order u/s.16 – The observations made by the Division Bench impliedly efface the findings recorded by the Competent Authority while refusing to confirm the seizure, thereby foreclosing the outcome of the appeal pending before the appellate authority – In effect, the Adjudicating Authority has undone the order of the Competent Authority even while the appeal against the said order is pending – Such a course of action tantamounts to abdicating the powers of the Appellate Authority, even when the order of the Competent Authority was still under challenge in appeal at the instance of the department – The impugned order passed by the High Court and the order passed by the Adjudicating Authority imposing penalty and ordering confiscation of the property held by appellants are declared to be arbitrary and contrary to law – The same are hereby set aside – The proceedings are revived from the stage of the SCN. [Paras 32, 33, 35, 38, 39]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Ankit Gyan. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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