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2021 (4) TMI 82 - HC - FEMARejection of permission to remit foreign exchange - FEMA ODI Regulations - approval on the basis of the reservations expressed by ED - as the wholly owned subsidiary of the respondent has already taken the credit of foreign exchange from various lenders and the foreign exchange has already come to the country. It is only this foreign currency which is now being repaid by the respondent - Writ of Mandamus, directing Respondent to permit Petitioner to make additional commitments and payments of USD 300 Million to its wholly owned subsidiary namely Jindal Steel and Power (Mauritius) Limited by way of equity subscription or loan or corporate guarantee or bank guarantee or through other permitted mode from Indian Bank for meeting its debt obligations - HELD THAT - We are of the view that the order of denial of permission dated 30.12.2019 based upon Regulation 9(3) of FEMA ODI Regulations gives no reason for rejecting the application of the respondent. Assuming for the sake of arguments that the reasons are contained in the e-mail of 30.12.2019 as well as in the letter of 03.12.2019, we are also required to see that the reasons so mentioned are not arbitrary, whimsical and in accordance with the scheme of the FEMA. The reasons for rejection must be considered and also must relate to the dominant purpose of the FEMA Regulations which is conservation of Foreign Exchange. The reason contained in the e-mail of 30.12.2019 namely reservation expressed by DOE/on-going investigations and in the letter of 03.12.2019 namely conducting investigations against M/s Jindal Steel Power under FEMA in four cases and conducting investigations under PMLA in three cases, cannot be a ground for denial of permission. The appellant cannot deny approval merely on the premise of pending investigation. It is not the case of the RBI, in the appeal, counter affidavit in the writ petition or argued before us that the remittances made in the past by the respondent have been misused. Till date pursuant to the permission of the RBI the respondent has remitted a total amount of 241.14 million USD (USD 90 million USD 54.99 million USD 96.15 million). Hence, we hold that even if we look at the reasons for rejection contained in the order dated 30.12.2019, the reasons are arbitrary, whimsical and do not further the scheme of Foreign Exchange Management Act. The reliance on word inter alia under Regulation 9(3) - Regulation 9(3) the word inter alia of FEMA ODI Regulations must take its colour from the scheme, drift and tenor of the Act as well as Regulations. The FEMA ODI Regulations do not contemplate any role of the third party or the agency for approval or for prior approval, least of all investigating agency. The only mention of pending investigation is under Regulation 6(2) (iii) ie. If the Indian Party is under RBI caution list/lists of defaulters or under investigation by an investigation/enforcement agency or by a regulatory body. The very fact that Regulation 9(3) makes a conscious omission of pending investigations, by an investigation/ enforcement agency, further strengthens our opinion that merely an on-going enquiry /pending investigations cannot be a ground for rejection of permission to remit Foreign Exchange. It will be relevant to point out that all permissions given by the appellant have categorically stated each permission is without prejudice to any action that may be taken by any investigative agency on account of contravention . We also note with approval that even after so-called reservation indicated by the DOE, the appellant has granted permission to the respondent on 09.09.2020 indicating no objection from the FEMA 1999 angle. The counter affidavit of the appellant has reiterated that the conditions imposed in the letter of 09.09.2020 are in line with FEMA ODI Regulations. Hence, we hold that the denial of permission dated 30.12.2019 based upon Regulation 9(3) of FEMA ODI Regulations is wrong. Learned Single Judge has not adverted to the preliminary objections raised in the counter affidavit. No finding against ED could have been given without ED being a party - We are unable to agree with this contention of the appellant as there is no finding given against the ED by the learned Single Judge. The learned Single Judge in Para 38 of the impugned order and judgment dated 04.12.2020 has observed merely that there is nothing on record of the writ court which shows that any demand appears to have been raised by the ED on the respondent. The learned Single Judge has further held that DOE has enough power under various statutory regimes to attach properties and assets of the defaulter individual. The appellant has rejected the application of the respondent at the behest of ED - We have already, while adverting to the arguments of the learned Sr. Counsel for the appellant in ground (A) held that the reasons for rejection have been merely the apprehension expressed by the ED. The said apprehension of the ED is neither in spirit of the scheme of FEMA nor Regulation 9(3). The reliance of RBI on the apprehensions expressed by ED in its e-mail of 30.12.2019 and the letter of 03.09.2020 itself has been held by us to be incorrect and hence, the rejection by the appellant dated 30.12.2019 is incorrect. In view of the above, the reliance placed on the judgment State of Bihar v. Asis Kumar Mukherjee (Dr) 1974 (12) TMI 74 - SUPREME COURT is misplaced. The appellant taking u-turn by taking permission - During the course of arguments the learned Sr. Counsel for the respondent has categorically made the statement that they would give a Board Resolution to deposit equivalent amount of the said financial commitment amounting to USD 241.5 million and an undertaking that it had unencumbered assets worth USD 241.5 million but the same was not acceptable to the respondent. Be that as it may, it is clear that the letter of 09.09.2020 was issued by the respondent after the so-called Panama/Mauritius Leaks and there is no justification or satisfactory explanation as to why the permission was granted even as late as 09.09.2020. Moreover, the learned Sr. Counsel for the appellant had relied on the Judgment M/s. Mahabir Jute Mills LTD., Gorakhpore Vs. Shri Shibban Lal Saxena and Ors 1975 (7) TMI 148 - SUPREME COURT to urge that the very fact that the appellant chose not to challenge the order and in fact comply with the same cannot be held against them. The said judgment need not detain us as we are of the opinion that the order dated 30.12.2019 is itself flawed. Application filed under Order I Rule 10 read with Section 151 of CPC by the Directorate of Enforcement seeking impleadment as a respondent in the present appeal - HELD THAT - A proper party is a person whose presence would enable the court who completely, effectively and properly adjudicate upon all matters and issues, though he may not be the person in favour of or against whom a decree is to be made for the reasons we have elaborated in our judgment dated 26.03.2021. We feel that DOE is neither a proper nor a necessary party to the present proceedings as no relief is claimed against DOE ii. The disputes in question can be effectively, completely and properly be adjudicated in the absence of applicant. We are also persuaded by the fact that there is no averment in the application as to why DOE chose not to file a similar application for impleadment in the original writ proceedings and has only come up for the first time in the present appeal. The application is totally silent on the said ground. In this view of the matter we find no merit in the application and the same is dismissed.
Issues Involved:
1. Territorial jurisdiction of the Delhi High Court. 2. Necessity of Enforcement Directorate (ED) as a party. 3. Delay and laches in filing the writ petition. 4. Concealment of material facts by the respondent. 5. Subjectivity of RBI's approval under FEMA ODI Regulations. 6. Role of ED in RBI's decision-making process. 7. Validity of reasons provided by RBI for rejecting the application. Issue-wise Detailed Analysis: 1. Territorial Jurisdiction: The appellant argued that the Delhi High Court lacks territorial jurisdiction. However, the court found that the authorized dealer bank, State Bank of India, overseas branch New Delhi, was involved, and RBI had directed the respondent to approach the New Delhi Regional Office. Thus, the court held that it had jurisdiction to entertain the writ petition. 2. Necessity of ED as a Party: The appellant contended that ED was a necessary and proper party. The court disagreed, stating the writ petition challenged the RBI’s order under FEMA ODI Regulations, not any action by the ED. The court also noted that the ED had sufficient statutory power to act independently and its absence did not affect the adjudication of the matter. 3. Delay and Laches: The appellant claimed the writ petition was delayed. The court noted the writ petition was filed on 17.06.2020, challenging the order dated 30.12.2019, and considering the COVID-19 lockdown, there was no undue delay warranting dismissal on this ground. 4. Concealment of Material Facts: The appellant alleged the respondent concealed material facts. The court found no intentional or malicious concealment of relevant information by the respondent, thus rejecting this claim. 5. Subjectivity of RBI's Approval under FEMA ODI Regulations: The appellant argued that RBI’s approval under Regulation 9 of FEMA ODI Regulations is based on subjective satisfaction. The court held that while RBI’s satisfaction is subjective, it must be reasonable, non-arbitrary, and in line with the purposes of FEMA. The court found RBI’s reasons for rejection, based on ongoing investigations by ED, were not sufficient grounds for denial. 6. Role of ED in RBI's Decision-Making Process: The court examined whether RBI’s rejection was influenced by ED’s objections. It concluded that while RBI can seek inputs from ED, the final decision must align with FEMA’s objectives. The court found RBI’s reliance on ED’s objections without independent assessment was improper and not justified under Regulation 9(3). 7. Validity of Reasons Provided by RBI for Rejecting the Application: The court scrutinized the reasons provided by RBI for rejecting the respondent’s application. It found the reasons arbitrary and whimsical, not furthering the scheme of FEMA. The court emphasized that mere existence of investigations by ED cannot be a ground for denying permission under FEMA ODI Regulations, especially when previous remittances were not misused. Conclusion: The court upheld the learned Single Judge’s decision, quashing RBI’s order dated 30.12.2019, and dismissed the appeal. It reiterated that RBI’s decision must be reasonable, non-arbitrary, and in line with FEMA’s objectives, and that the reasons provided for rejection did not meet these criteria. The court also dismissed the application for impleadment by ED, stating ED was neither a necessary nor a proper party to the proceedings.
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