2025 (1) TMI 14 - HC - FEMA

Initiating proceedings against the petitioner on the basis of provision which stood omitted by the Finance Act, 2015 - proceedings were initiated as against the petitioner alleging violation of Section 6 (3) (b) of FEMA Act in the year 2021 - As submitted the said provision stood omitted by the Finance Act, 2015, which was notified on 15.10.2019 - HELD THAT - The provisions of the Finance Act, 2015 are quite specific. It provides for amendments to the FEMA Act and by Section 139 of Finance Act, 2015, Section 6 (3) of the FEMA Act stood omitted. The said omission was effective from the date of notification i.e., 15.10.2019. Thus, we notice that the complaint as well as the show cause notice issued to the petitioner were specifically referable to Section 6 (3) (b) of the FEMA Act. It is clear that the complaint itself was made on 25.10.2019 and the show cause notice was issued on 25.02.2020. It is also clear that Section 6 (3) (b) stood omitted by the Finance Act, 2015 as notified on 15.10.2019. In view of the clear language of the omission, the contentions raised by the learned panel counsel that Section 6 of the General Clauses Act would come to the aid of the respondents cannot be accepted. As in Kolhapur Canesugar Works Ltd. 2000 (2) TMI 823 - SUPREME COURT has clearly held that Section 6 only applies to repeals and not to omissions and since the present case is specifically one of omission, we are of the opinion that Section 6 would not have any application in the instant case. In view of the fact that what has been specifically referred in the complaint and the show cause notice is Section 6 (3) (b), which stood omitted even as on the date, when the complaint was filed, the entire action as against the petitioner on the basis of infraction of Section 6 (3) (b) was without jurisdiction. WP allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the proceedings initiated against the petitioner based on Section 6 (3) (b) of the Foreign Exchange Management Act, 1999 (FEMA) were justified, given that this provision was omitted by the Finance Act, 2015.
Whether the omission of Section 6 (3) (b) affects the jurisdiction and legality of the actions taken against the petitioner.
The applicability of Section 6 of the General Clauses Act in cases of omission as opposed to repeal.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification of Proceedings Based on Omitted Provision

Relevant Legal Framework and Precedents: The proceedings were initiated under Section 6 (3) (b) of FEMA, which was omitted by the Finance Act, 2015, effective from 15.10.2019. The petitioner argued that actions based on an omitted provision are without jurisdiction.
Court's Interpretation and Reasoning: The court noted that Section 6 (3) (b) was omitted as of 15.10.2019, prior to the complaint and show cause notice dates. The court emphasized that omissions are distinct from repeals, and Section 6 of the General Clauses Act does not apply to omissions.
Key Evidence and Findings: The complaint was filed on 25.10.2019, and the show cause notice was issued on 25.02.2020, both referencing the omitted Section 6 (3) (b).
Application of Law to Facts: The court applied the principle that omissions do not invoke Section 6 of the General Clauses Act, thus rendering actions based on an omitted provision void.
Treatment of Competing Arguments: The respondents contended that liabilities under FEMA are civil and continuing, unaffected by the omission. However, the court rejected this, citing the Apex Court's distinction between repeals and omissions.
Conclusions: The court concluded that the proceedings based on Section 6 (3) (b) were without jurisdiction and unsustainable, as the provision was omitted before the actions were initiated.

Issue 2: Applicability of Section 6 of the General Clauses Act

Relevant Legal Framework and Precedents: The court referenced the Apex Court's decision in Kolhapur Canesugar Works Ltd. v. Union of India, which clarified that Section 6 applies to repeals, not omissions.
Court's Interpretation and Reasoning: The court reiterated that Section 6 of the General Clauses Act does not apply to omissions, aligning with the precedent set by the Apex Court.
Key Evidence and Findings: The court found no savings clause in the Finance Act, 2015, to support the continuation of liabilities under the omitted provision.
Application of Law to Facts: The court applied the legal principle that omissions do not invoke Section 6, thus nullifying the actions based on the omitted section.
Treatment of Competing Arguments: The respondents' argument that civil liabilities continue despite omission was dismissed based on established legal principles.
Conclusions: The court concluded that Section 6 of the General Clauses Act does not apply, and the actions against the petitioner were without legal basis.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The Apex Court has clearly held that Section 6 only applies to repeals and not to omissions."
Core Principles Established: The distinction between repeals and omissions is critical, with omissions not invoking Section 6 of the General Clauses Act. Actions based on omitted provisions are void ab initio.
Final Determinations on Each Issue: The writ petition was allowed, and the show cause notice and complaint were quashed as they were based on an omitted provision, rendering them without jurisdiction.

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