2014 (3) TMI 170 - HC - FEMA

Issue of notice at old address - principle of natural justice - proceedings under Foreign Exchange Regulation Act, 1973 imposing penalty of Rs. 50 lacs on each of the petitioners. - Held that - though respondent no. 2 was aware as far back as 17th July, 2000 about the new address of petitioners (as is apparent from the summons issued to the petitioners by respondent no. 2 itself), yet on 20th August, 2002, it issued show cause notices to the petitioners at their old address. It is pertinent to mention that at the old address, the petitioners were not served and the service report states that they are no longer residing there. Consequently, this Court is of the opinion that in the present cases, there has been violation of principles of natural justice and the petitioners had no opportunity to defend themselves. Regarding alternate remedy available to petitioners - Held that - alternative remedy is only a rule of prudence and not a statutory prohibition. It is settled law that when there is violation of principles of natural justice, a writ petition is certainly maintainable as held by the SC in In Whirlpool Corpn. Vs. Registrar of Trade Marks 1998 (10) TMI 510 - SUPREME COURT - matter remanded back.

Summary

Issues:
Seeking quashing of penalty orders under The Foreign Exchange Regulation Act, 1973 due to violation of natural justice, maintainability of writ petitions under Foreign Exchange Management Act, 1999, delay in filing petitions, and availability of alternative remedy.

Violation of Natural Justice:
The petitioners filed writ petitions to quash penalty orders imposed under The Foreign Exchange Regulation Act, 1973, citing violation of natural justice as show cause notices were sent to their old address despite the authority being aware of their new address. The Court noted that the petitioners were not served at the old address, indicating a lack of opportunity to defend themselves. The judgment emphasized the importance of principles of natural justice and the right to be heard in such matters.

Delay and Laches:
The respondents argued that the writ petitions were barred by delay and laches since the impugned orders from 2003 were challenged in 2012. However, the petitioners contended that they filed the petitions promptly upon receiving recovery notices in 2012. The Court found no evidence to dispute the petitioners' claim, ruling that there was no delay in filing the writ petitions.

Alternative Effective Remedy:
The respondents contended that the writ petitions were not maintainable as the petitioners had an alternative effective remedy under Section 19 of the Foreign Exchange Management Act, 1999. However, the Court held that the availability of an alternative remedy is a rule of prudence and not a statutory prohibition. Citing the Supreme Court's decision in Whirlpool Corpn. Vs. Registrar of Trade Marks, the Court ruled that a writ petition is maintainable when there is a violation of natural justice, even if an alternative remedy exists. The judgment highlighted that the authority must have jurisdiction, and usurping jurisdiction without legal foundation allows for the High Court's intervention.

Judgment and Directions:
The High Court set aside the impugned penalty orders and remanded the matters back to the authority due to the violation of natural justice. The consequential recovery orders issued in 2012 were also quashed. Both petitioners were directed to appear before the authority for expeditious disposal of the matters within twelve weeks. The Court clarified that its decision did not express any opinion on the demand against a specific entity. The writ petitions and application were disposed of in light of the Court's directions.