2024 (7) TMI 1259 - HC - FEMA

Maintainability of the writ petition - Contravention of the FEMA laws - Declaring Petitioner guilty of contravention of the provisions u/s 10(6) of the Foreign Exchange Management Act - penalty imposed - HELD THAT - In respect of preliminary objection as to the maintainability of the writ petition, the learned Senior Panel Counsel appearing for the first respondent relied upon the judgment of the Hon'ble Supreme Court of India reported in the case of Raj Kumar Shivhare Vs. Assistant Director 2010 (4) TMI 432 - SUPREME COURT - Therefore, the writ petition itself is not maintainable since, there is alternative remedy provided u/s 16(1), 19(1) and 35 of the FEMA. That apart, the petitioner was not granted any immunity from the adjudication proceedings initiated under the provisions of FEMA. Whereas as per the order passed by the NCLT, the company had immunity from regulatory or administrative proceedings but not adjudicating proceedings as per Section 43 of FEMA. Further the proceedings arising in relation to the provisions of Section 13 of FEMA shall not abate by the reason of insolvency of the person liable under that Section. Further, the adjudication proceedings were initiated by way of issuing show cause notice dated 31.03.2017. It is much before the corporate insolvency resolution process. Though the learned Senior Counsel appearing for the petitioner relied upon the judgment of M/s. Commercial Steel Limited 2021 (9) TMI 480 - SUPREME COURT in respect of maintainability of the writ petition, which held that when the existence of an alternate remedy is not an absolute bar to the maintainability of a writ petition under Article 226 of the Constitution of India. But the writ petition can be entertained in exceptional circumstances where there is a breach of fundamental rights, a violation of principles of natural justice, an excess of jurisdiction or a challenge to the vires of the statute of delegated legislation. But none of the exceptions as stated above is applicable to the petitioner herein, since there is no breach of fundamental right and the petitioner was duly served with show cause notice and given opportunity of hearing. Further the first respondent has power to impose the penalty. Second respondent submitted that the recovery of penalty amount by the proceeding dated 28.02.2020 was challenged before this Court in 2024 (1) TMI 1305 - MADRAS HIGHT COURT . Subsequently, the recovery of penalty proceeding was withdrawn and therefore, the writ petition was also dismissed as withdrawn by this Court, by an order. However, insofar as the penalty imposed on the petitioner has not been withdrawn so far. Therefore, this Court finds no infirmity or illegality in the order passed by the first respondent. This writ petition is devoid of merits and liable to be dismissed. WP dismissed.

Summary

Issues Involved:
1. Contravention of FEMA provisions.
2. Maintainability of the writ petition.
3. Immunity under Section 32A of the IBC.
4. Adjudication proceedings and penalties.

Detailed Analysis:

1. Contravention of FEMA Provisions:
The petitioner company was found guilty of contravening Section 10(6) of the Foreign Exchange Management Act, 1999 (FEMA) read with Regulation 6(1) of the Foreign Exchange Management (Realization, Repatriation, and Surrender of Foreign Exchange) Regulation, 2000. The first respondent imposed a penalty of Rs. 15,20,00,000/- on the petitioner company for the alleged contraventions. The petitioner company had imported 23 consignments of chemicals in 2010-11, declared at a higher value, and failed to clear nine consignments, which continued to lie at the port. The first respondent initiated an investigation and found that the petitioner company had intentionally imported goods not for clearance but to send foreign exchange out of the country under the guise of importing and trading goods locally.

2. Maintainability of the Writ Petition:
The first respondent argued that the writ petition was not maintainable as there were alternative remedies available under Sections 16(1), 19(1), and 35 of FEMA. The judgment of the Supreme Court in Raj Kumar Shivhare Vs. Assistant Director was cited, emphasizing that when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation. The court agreed with this argument, stating that the petitioner had not demonstrated why the appellate jurisdiction under Section 35 of FEMA did not provide an efficacious remedy.

3. Immunity under Section 32A of the IBC:
The petitioner argued that under Section 32A of the Insolvency and Bankruptcy Code (IBC), the company was granted immunity from liabilities for offences committed prior to the commencement of the corporate insolvency resolution process. However, the court noted that the immunity provided under Section 32A of the IBC does not extend to adjudication proceedings under FEMA. The proceedings initiated by the show cause notice dated 31.03.2017 were much before the corporate insolvency resolution process, and thus, the petitioner was not granted immunity from these proceedings.

4. Adjudication Proceedings and Penalties:
The adjudication proceedings were conducted as per the due process, and the impugned order was passed after giving the petitioner and the second respondent an opportunity of hearing. The court found no infirmity or illegality in the order passed by the first respondent. The petitioner company was liable for penal action under Section 13(1) read with Section 42(1) of FEMA for the contraventions committed.

Conclusion:
The writ petition was dismissed on the grounds that it was not maintainable due to the availability of alternative remedies under FEMA. The court upheld the penalty imposed by the first respondent, stating that the petitioner was not granted immunity from the adjudication proceedings under FEMA, and the proceedings were initiated before the corporate insolvency resolution process. The court found no breach of fundamental rights, violation of principles of natural justice, or excess of jurisdiction in the proceedings conducted by the first respondent. Consequently, the connected miscellaneous petition was also closed, with no order as to costs.