2006 (7) TMI 326 - HC - Companies Law

Issues Involved:
1. Maintainability of appeals against adjudication orders passed under FERA before the Special Director (Appeals) under FEMA.
2. Interpretation of Section 49 of FEMA regarding pending proceedings and appeals.
3. Applicability of Sections 17 and 19 of FEMA to appeals against orders passed under FERA.
4. Legislative intent behind the repeal of FERA and enactment of FEMA.

Detailed Analysis:

1. Maintainability of Appeals Against Adjudication Orders Passed Under FERA Before the Special Director (Appeals) Under FEMA:

The core issue addressed is whether appeals against adjudication orders passed by the Assistant Director/Deputy Director of Enforcement under the repealed Foreign Exchange Regulation Act, 1973 (FERA) are maintainable before the Special Director (Appeals) appointed under the Foreign Exchange Management Act, 1999 (FEMA). The court concluded that such appeals are indeed maintainable before the Special Director (Appeals). This conclusion is based on the interpretation that the substantive right of appeal vested in a litigant under FERA is preserved under FEMA, and the appeals should be filed before the corresponding appellate forum constituted under FEMA.

2. Interpretation of Section 49 of FEMA Regarding Pending Proceedings and Appeals:

Section 49 of FEMA deals with the repeal and saving provisions related to FERA. It states that even after the repeal of FERA, all proceedings pending under FERA are saved, and the adjudicating officer can take notice of any contravention under FERA for two years from the commencement of FEMA (i.e., until 31-5-2002). The court noted that the substantive right of appeal vested in a litigant under FERA is not affected by the repeal of FERA, and such appeals must be instituted before the appropriate appellate forum provided under FEMA.

3. Applicability of Sections 17 and 19 of FEMA to Appeals Against Orders Passed Under FERA:

Sections 17 and 19 of FEMA outline the appellate forums for adjudication orders. Section 17 provides that appeals against orders by the Assistant Director/Deputy Director of Enforcement are maintainable before the Special Director (Appeals), while Section 19 provides that appeals against orders by other adjudicating authorities are maintainable before the Appellate Tribunal. The court held that these provisions apply to appeals against orders passed under FERA as well. The interpretation was that the word "Adjudicating Authorities" in these sections includes those under FERA, ensuring that the substantive right of appeal is not destroyed.

4. Legislative Intent Behind the Repeal of FERA and Enactment of FEMA:

The court examined the legislative intent behind the repeal of FERA and the enactment of FEMA. It was found that the legislature intended to preserve the substantive right of appeal against orders passed under FERA while providing new appellate forums under FEMA. The court rejected the revenue's argument that appeals against orders passed under FERA should only be instituted before the Appellate Tribunal constituted under FEMA. Instead, it was held that appeals against orders by the Assistant Director/Deputy Director of Enforcement under FERA are maintainable before the Special Director (Appeals) under FEMA, while appeals against orders by other adjudicating authorities under FERA are maintainable before the Appellate Tribunal.

Conclusion:

The petitions were allowed, and the impugned orders passed by the Special Director (Appeals) were quashed. The Special Director (Appeals) was directed to hear the appeals filed by the petitioners on merits and in accordance with law. The court concluded that the appeals against adjudication orders passed by the Assistant Director/Deputy Director of Enforcement under the repealed provisions of FERA read with Section 49 of FEMA are maintainable before the Special Director (Appeals). Appeals against orders of all other adjudicating authorities are maintainable before the Appellate Tribunal constituted under FEMA.

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