2023 (1) TMI 943 - HC - FEMA

Maintainability of writ petition before the Chennai High Court - Availability of alternative remedy - Validity of adjudication order passed by the Special Director of Enforcement in proceeding imposing penalty for the contravention of Section 64(2) of the Foreign Exchange Regulation Act - HELD THAT - In the instant case, on going through the materials placed before us and after carefully considering the order passed by the Special Director of Enforcement, we find that we have to necessarily deal with a lot of documents and get into disputed questions of fact. To avoid such a scenario, the enactment itself provides for further remedies under Section 19 of FEMA before the Appellate Tribunal and thereafter, under Section 35 of the Act, by way of filing a further Appeal before the High Court against the order passed by the Appellate Tribunal. These remedies have been provided to enable an aggrieved person to contest the order passed by the adjudicating authority, both on facts and on law. These appellate remedies cannot be bypassed and the doors of the High Court cannot be knocked straight away under Article 226 of the Constitution of India. Where the High Court has entertained a Writ Petition and it is pending for a long time, the Writ Petition should not be thrown out on the ground of alternative remedy. However, it is not an absolute rule and there are appropriate cases where the parties will have to be directed to avail an efficacious alternative remedy of appeal. That course can be adopted at any stage and even at the stage of Writ Appeal. In the present case, there is no lack of jurisdiction for the Special Director of Enforcement to pass the impugned order, there is no violation of principles of natural justice and this Court does not find any special circumstances to disregard the alternative remedy and to decide the dispute in this Writ Petition. Apart from these reasons, we have already held that the case requires determination of disputed facts based on documents and it will be fit and proper if this exercise is done before the Appellate Tribunal. Entire cause of action has taken place at Mumbai and the order has also been passed by the Special Director of Enforcement at Mumbai. Just because the IOB has a Treasury(Foreign) Department at Chennai, that by itself will not become a part of the cause of action. This is yet another ground on which we are not inclined to entertain the present Writ Petition. We are not inclined to go into the merits of this case and deal with various factual issues that were raised on either side. The petitioners are permitted to file appeal against the order passed by the Special Director of Enforcement within a period of 45 days from the date of the receipt of copy of this order.

Summary

Issues:
Challenge to adjudication order under FERA - Jurisdiction of Special Director of Enforcement - Compliance with principles of natural justice - Availability of alternative remedy of appeal - Cause of action - Disputed questions of fact - Applicability of FEMA - Venue of cause of action - Disposal of Writ Petition.

Detailed Analysis:

1. Challenge to Adjudication Order under FERA:
The Indian Overseas Bank (IOB) and its employees contested the adjudication order by the Special Director of Enforcement under FERA, specifically Section 64(2). The transaction in question involved transferring funds to a vostro account maintained by a foreign bank, leading to alleged violations and issuance of show cause notices.

2. Jurisdiction of Special Director of Enforcement:
The petitioners argued that the Special Director of Enforcement lacked jurisdiction to impose penalties, claiming compliance with RBI directives and no violation of FERA provisions. However, the court found that the Special Director had the power to adjudicate and impose penalties under FERA, as no additional authorization was required.

3. Compliance with Principles of Natural Justice:
The court determined that the impugned order did not violate principles of natural justice, as all concerned parties were given sufficient opportunity to present their case before the adjudicating authority.

4. Availability of Alternative Remedy of Appeal:
The respondents contended that the Writ Petition was not maintainable due to the availability of alternative remedies under FEMA, including appeals before the Appellate Tribunal and the High Court. The court emphasized the importance of exhausting these remedies before seeking relief through a Writ Petition.

5. Cause of Action and Venue:
The court noted that the cause of action and the order's issuance both took place in Mumbai, despite the presence of an IOB department in Chennai. This geographical consideration was a significant factor in determining the appropriate forum for adjudication.

6. Disputed Questions of Fact and Applicability of FEMA:
Given the complexity of factual issues and the need to delve into disputed facts, the court highlighted the availability of remedies under FEMA, directing the petitioners to pursue their case before the Appellate Tribunal to address both factual and legal aspects.

7. Disposal of Writ Petition:
Ultimately, the court disposed of the Writ Petition by permitting the petitioners to file an appeal within a specified period, extending interim protection, and emphasizing the importance of availing the appellate remedy. The court's decision aimed to ensure due process and adherence to legal procedures in resolving the dispute.

This detailed analysis of the judgment highlights the key legal issues, arguments presented by both parties, and the court's reasoning in addressing each aspect comprehensively.