2019 (7) TMI 1878 - HC - FEMA

Proceedings under FEMA - effect of the adjudication order made during the pendency of the writ appeals - ad-interim relief - Merely because the adjudicating authority has passed an order during the pendency of the writ appeals, it cannot be said that the writ appeals have become infructuous - whether writ appeals should be entertained? - HELD THAT - As appellants were fully aware about the date fixed for hearing before the adjudicating authority. There is a default on the part of the appellants as they did not appear before the adjudicating authority and they did not move this Court for grant of appropriate interim relief. Knowing fully well that the adjudicating authority is proceeding with the hearing, the appellants took no steps and allowed the adjudicating authority to pass an order. It is not as if immediately after the impugned order was passed, that the adjudicating authority fixed the matter for hearing. The date for hearing was fixed nearly one year after the present appeals were filed. As observed earlier, one of the arguments canvassed on behalf of the respondents that the appeals have become infructuous, cannot be accepted. However, these appeals are continuation of writ proceedings before the learned Single Judge under Article 226 of the Constitution of India. A remedy under Article 226 of the Constitution of India is always discretionary and equitable. The impugned order of the learned Single Judge was passed on 6th October 2017. The present appeals were pending from 17th November 2017. The adjudicating authority granted enough time to the appellants to seek interim relief in these appeals. The hearing was fixed one year after the impugned order of the learned Single Judge. The appellants took the risk of not attending before the adjudicating authority knowing fully well that the appellants were not armed with any ad-interim order of stay of this Court. Thus, due to their own conduct, the appellants allowed the adjudicating authority to pass orders of adjudication. It is not the case of the appellants that they did not receive legal advice. They are represented by Senior Advocates. As pointed out earlier, an efficacious remedy of filing an appeal under Section 19(1) of FEMA is available to the appellants. It cannot be said that the remedy is not efficacious as there is a power vested in the appellate Tribunal to waive the requirement of the deposit of the penalty. Moreover, all contentions which are raised in the appeals can be gone into by the appellate authority. The issues raised by the appellants have not been finally concluded and notwithstanding the observations made by the learned Single Judge, all issues remain open which can be agitated by the appellants in the statutory appeals. It is for the reasons which are recorded above that we are not inclined to entertain the writ appeals and interfere with the proceedings under FEMA. Accordingly, appeals and also pending interlocutory applications are dismissed. We direct that the ad-interim order in terms of paragraph 5 of the order dated 28th March 2019 will continue to operate for a period of one month from today.

Summary

Issues:
Appeals arising from common judgment on writ petitions challenging proceedings under FEMA, show-cause notice, and adjudication order.

Analysis:
1. The three appeals stem from a common judgment on writ petitions contesting proceedings under FEMA, specifically challenging a show-cause notice and a complaint issued by the Directorate of Enforcement. The petitions were filed by a company, a former director, and a director of the company under Articles 226 and 227 of the Indian Constitution.

2. The Single Judge refused to intervene, citing FEMA's comprehensive provisions structuring rights and regulations for aggrieved parties post-adjudication. The Judge emphasized the availability of an appeal remedy under FEMA against the adjudicating authority's decisions, indicating a structured framework for addressing grievances.

3. The company's writ petition was influenced by a Supreme Court ruling in a similar case. The appeals by the company and the directors challenge the show-cause notice, alleging predetermined issues, malafide proceedings, and lack of specific allegations against the directors under Section 42 of FEMA.

4. The respondents argue that the subsequent adjudication order provides a statutory appeal remedy under Section 19 of FEMA, allowing for a comprehensive review of contentions raised during the proceedings. The Appellate Tribunal holds the power to waive penalty deposits if deemed necessary.

5. The appellants contend that the adjudication order during the appeals' pendency doesn't render the appeals moot. They cite Supreme Court precedents to support their argument and emphasize the illegality of the show-cause notice and the ex-parte nature of the adjudication order.

6. Applications were filed seeking amendments to incorporate challenges to the adjudication order. The appellants were granted sufficient time to seek interim relief but failed to appear before the adjudicating authority, leading to the passing of orders due to their inaction.

7. The Court notes that the appeals are a continuation of the writ proceedings, emphasizing the discretionary and equitable nature of remedies under Article 226 of the Constitution. The appellants' failure to attend before the adjudicating authority despite being aware of the proceedings is highlighted.

8. Despite the dismissal of the appeals, the Court clarifies that all issues raised by the appellants remain open for adjudication in the statutory appeals under FEMA. The Court refrains from making a final determination on the merits of the challenges raised in the writ petitions and the adjudication order.

9. The Court declines to entertain the writ appeals, emphasizing the availability of an efficacious remedy through statutory appeals under FEMA. It directs the continuation of the ad-interim order for a specified period, allowing for further legal proceedings in the matter.