2023 (6) TMI 1458 - HC - FEMA

Violation of FERA initiated against the Petitioners in relation to import of machinery from Germany - whether the impugned notices were issued under the FERA which was repealed under Section 49 of the FEMA? - HELD THAT - Section 49 of the FEMA clearly states that the FERA is repealed and Section 49(3) provides that no note of any offence can be taken for the violation of the FERA after the expiry of two (2) years from the date of commencement of the FEMA. Further, Section 49(4) provides that all the offences committed under the FERA and which were taken note of within the period prescribed under Section 49(3) shall be governed by the provisions of the FERA. It is relevant to note that the FEMA came into force on 01.06.2000. By virtue of Section 49(3) of the FEMA, no proceedings under the FERA could have been initiated after two years from 01.06.2000 i.e., from 31.05.2002. Proceedings for violations the FERA were initiated before 31.05.2002 - The show cause notices for violation of the FERA were first issued on 15.03.2002. The impugned notices were issued in furtherance of the adjudicatory process giving an opportunity of personal hearing to the Petitioners. Therefore, it cannot be said that it was only vide the impugned notices dated 26.07.2004 that violation of the FERA by the Petitioners was taken note of. It was on 15.03.2002 that proceedings for violation of the FERA were initiated and such initiation of proceedings is well within the sunset period of two years as mentioned in Section 49(3) of the FEMA. Accordingly, this Court holds that the impugned notices are valid and proceedings for violation of the FERA against the Petitioners will be governed by the FERA.

Summary

Issues:
Challenge to hearing notices under FERA, jurisdiction of impugned notices, interpretation of Section 49 of FEMA, initiation of proceedings under FERA before the sunset period.

Analysis:
The writ petition challenges hearing notices under FERA as illegal and without jurisdiction. The Petitioners argue that the impugned notices issued in 2004 are beyond the two-year limitation period post the commencement of FEMA in 2000. However, Respondents claim the initiation of proceedings under FERA before the sunset period. The central issue is whether the impugned notices were issued validly under the repealed FERA.

The Court delves into Section 49 of FEMA, which repeals FERA and sets a two-year limitation for taking cognizance of FERA offenses post the commencement of FEMA in 2000. Notably, all offenses committed under FERA within this period are to be governed by FERA provisions. The critical question is whether the proceedings against the Petitioners were initiated before the two-year limit.

The Court finds that proceedings were indeed initiated in 2002 when show cause notices were issued to the Petitioners. Case law from the Delhi High Court supports this stance, emphasizing that the initiation of proceedings under FERA is deemed from the issuance of show cause notices. This aligns with the legislative intent behind Section 49(3) of FEMA, preserving actions taken within the two-year window post-FEMA commencement.

Further judicial precedents reinforce that show cause notices within the two-year period validate the continuation of proceedings under FERA. Notably, cases have upheld the validity of proceedings initiated under FERA before the sunset period, even if subsequent notices were issued post the two-year mark. In this context, the Court dismisses the writ petition, upholding the validity of the impugned notices and affirming that proceedings under FERA against the Petitioners will be governed by FERA provisions.

In conclusion, the Court's analysis of Section 49 of FEMA, supported by legal precedents, establishes the validity of the impugned notices and the continuation of proceedings under FERA against the Petitioners. The judgment affirms the adherence to statutory timelines and the preservation of actions initiated within the specified period post the enactment of FEMA.