2021 (12) TMI 132 - HC - FEMA

Proceedings in terms of section 16(1) r/w sec. 13 of the Foreign Exchange Management Act, 1999 - contravention of the provisions of sections 3(b), 5, 6(2)(a) 10(6) of FEMA r/w. Regulations 3 4(a) of the Foreign Exchange Management (Permissible Capital Account Transactions) Regulation 2000 in relation to a foreign exchange - HELD THAT - After service of notice, the respondents having entered appearance through the Central Govt. Counsel vehemently oppose the petitions making submission in justification of the impugned notice the complaint and in support of the reasons on which they have been constructed. As these Writ Petitions being devoid of merits, are liable to be dismissed and accordingly, they are, all contentions having been kept open. Petitioners are granted a period of four weeks for submitting their reply to the subject notice; discretion lies with the answering respondents to grant some more time as well if a case is made out therefore; it is also open to the petitioners to seek reasonable clarifications from the quarters concerned, if need be. The observations herein above made being confined to disposal of these Writ Petitions, shall not shade the reply to be submitted by the petitioners and influence the formation of the opinion by the answering respondents as to enquiry-worthiness of the matter.

Summary

Issues:
Challenge to issuance of notice and complaint under FEMA for alleged contravention of provisions.

Analysis:
1. The petitioners challenge the notice and complaint dated 24.12.2018 under FEMA for alleged contravention of provisions, seeking quashment due to lack of material particulars. The petitioners argue that the notice and complaint are vague, putting them at a disadvantage. However, the court notes that the petitioners can reply to the notice and seek the dropping of proceedings, maintaining the statutory scheme's efficacy. The ground of mala fide was given up, and no case for court's indulgence on mala fide grounds was established.

2. The petitioners rely on various legal precedents to support their argument that a notice lacking material particulars is invalid. The court acknowledges the principles laid down in these cases, emphasizing that adequate notice is essential for natural justice. However, the court agrees with the respondent that the infirmities in the notice are overshadowed by the contents of the complaint, which provide sufficient particulars for the petitioners to understand the case against them.

3. The court notes that the petitioners, being educated individuals associated with significant business transactions, are not at a loss to understand the notice and complaint. The court emphasizes that the standing of the noticee is crucial in adjudging the adequacy of the notice. The court highlights that the petitioners were previously associated with the affairs of the noticee company and were issued a show cause notice earlier, making the current notice a continuation of the same proceedings.

4. The court addresses the argument that the notice and complaint could have been more concrete and articulated. While acknowledging room for improvement, the court emphasizes that the petitioners are not strangers to the case, having participated in related proceedings. The court urges for more deliberation to avoid prejudicing the petitioners' case before the authorities.

5. The court refers to a prior judgment involving similar facts where the challenge to a show cause notice was declined, supporting the respondent's position. The court dismisses the writ petitions as devoid of merits, granting the petitioners four weeks to submit their reply to the notice. The court leaves the decision on granting more time to the answering respondents' discretion and allows the petitioners to seek clarifications if needed.

In conclusion, the court dismisses the writ petitions, emphasizing the importance of adequate notice and the petitioners' ability to respond effectively to the allegations.