2019 (2) TMI 884 - HC - FEMA

Contravention of provisions of Section 9(3) of the FERA Act - violation of FERA - petitioner having not been made aware of the show cause notice, the impugned order passed thereon is exparte and caused grave and serious prejudice to him - Held that - Various foreign exchange resources of the country and the proper utilization thereof in the interests of the economic development of the country. This Act is now repealed by virtue of a new law namely, the Foreign Exchange Management Act, 1999, but even though repealed, the proceedings under FERA Act can continue. The provisions of the Act enable to carry out searches and confers powers to arrest as well. The violation of FERA is, thus a grave and serious issue. Its strict and stringent provisions enable the authorities to adjudicate into the breaches of the law, and thereafter, if proved, impose penalties. That is how the impugned order proceeds. The impugned order does not show that the petitioner was duly served, but deliberately did not appear or avoided to appear. Having received the show cause notice and related papers, he did not file any reply. He avoided even the service of the proceedings. The above is not the position emerging from the order itself. Rather the order is passed after observing that certain attempts to serve the petitioner were made but having not found him at the premises of one Hasmukh Shah, the order was passed in his absence. Once the factual position as stated in the Writ Petition is undisputed, then, this Writ Petition must succeed. We allow the Petition by quashing and setting aside the impugned order.

Summary

Issues: Alleged contravention of provisions of Section 9(3) of the FERA Act, service of show cause notice, procedural irregularities, serious prejudice caused to the petitioner.

Analysis:
1. The petitioner challenged an order passed by the Special Director (Enforcement) under the Foreign Exchange Management Act, 1999, alleging contravention of Section 9(3) of the FERA Act. The information leading to the order was obtained from a search conducted based on details received from the Income Tax Department.

2. The petitioner contended that the show cause notice was not properly served, as it was affixed to a different address than the one mentioned by the petitioner. The respondent argued that the petitioner failed to respond to the notice or attend the personal hearing, which disentitled him to any relief.

3. The petitioner, through his advocate, presented a detailed account of his activities as a Non-Resident Indian in Dubai, highlighting that no illegality was found in his business dealings by Dubai authorities. He also clarified his lack of connection with certain commercial entities searched during the investigation.

4. The court found that the impugned order caused serious prejudice to the petitioner, emphasizing the stringent provisions of the FERA Act aimed at regulating foreign exchange transactions. The court noted that the petitioner's non-appearance was not deliberate but due to procedural irregularities in the service of the notice.

5. Consequently, the court allowed the petition, quashing the impugned order and directing a fresh adjudication of the show cause notice issued to the petitioner. The court instructed the petitioner to file a written reply within four weeks and granted the Adjudicating Authority three months to pass a fresh order after considering the reply and providing a personal hearing to the petitioner.

6. The court clarified that the fresh order must be a speaking order, ensuring transparency and accountability in the adjudication process. Overall, the judgment focused on rectifying the procedural deficiencies to uphold the principles of natural justice and fair adjudication in matters concerning foreign exchange regulations.