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2023 (6) TMI 250 - HC - FEMAConstitutional validity of Section 37A of FEMA Act - order of the Competent Authority affirming seizure by the Authorised Officer - Seeking consequential prayers of quashment of seizure order u/s 37A(1) and confirmation order of such seizure under Section 37A(3) of the Act - reason for seizure was on the ground that the respondent/Directorate of Enforcement found during the course of investigation that no agreement or legal basis was available for remitting the money by the petitioner. Royalty was not a part of the product cost. No work order or purchase order was placed. No intellectual property rights were received. Based upon the impugned seizure, seizure order was passed on 29th April 2022 invoking Section 37A(1) of the Act. Whether the writ petition would be maintainable on the prayer that is sought i.e., to hold Section 37A of the Act to be unconstitutional on the ground that it is manifestly arbitrary and violative of Article 14 of the Constitution of India? - HELD THAT - Article 19 would not be available to any person, who is not a citizen of this country. Same goes with the Division Bench judgment of Allahabad High Court where at para-14 it is clearly held that Article 19(1)(d) and (e) are unavailable to foreigners because these rights are conferred only on the citizens. Rights under Article 19 are withheld expressly to foreigners. The Division Bench also holds that it is of the opinion that foreigners enjoy some fundamental rights of this country but the same are confined to Article 21 of the Constitution of India which deals with life and liberty and does not include the rights guaranteed under Article 19 of the Constitution. The question therein was right to free trade under Article 19(1)(g) and, therefore, held that it was available only to Indian citizens and not to foreigners. On a coalesce of the judgments rendered by the Apex Court and that of different constitutional Courts what would unmistakably emerge is that Articles 14 and 21 of the Constitution of India, the nation s Grundnorm would be available to every person and they are not restricted to the citizens of the country only. However, Articles 15, 16 and 19 are restricted only to citizens of this country. The challenge in the case at hand is on the ground that the provision is unreasonable or manifestly arbitrary, both of which would come within the ambit of Article 14 of the Constitution of India and the petition challenging the constitutional validity on the ground that it is manifestly arbitrary and violative of Article 14 or unreasonable, again being violative of Article 14, are all maintainable contentions before the constitutional Courts of the country as they are person centric and not citizen centric . Therefore the first issue that has arisen for consideration qua maintainability is answered in favour of the petitioner holding the petition to be maintainable qua the challenge. Whether Section 37A of the Act gives uncanalised and unguided power on it suffering from absence of safeguards ? - On a coalesce of the judgments relied on by the petitioner and others that are quoted hereinabove, as also the reasons rendered by this Court, what would unmistakably emerge is that Section 37A of the Act does not suffer from any manifest arbitrariness for this Court to strike it down on any of the grounds urged by the petitioner. The purpose behind the amendment is already quoted, and checks and balances available, under Section 37A are also quoted and analysed. Therefore, the second point that arose for consideration is answered against the petitioner. Whether the order passed by the authorized officer suffers from non-application of mind? - The only reason that is projected by the petitioners to knock at the doors of this Court despite the remedy of filing an appeal before the Appellate Tribunal being appealable under subsection (5) of Section 37A of the Act is that the order of the Competent Authority affirming seizure by the Authorised Officer does not bear application of mind. It is trite law that application of mind is discernible from any order, if the order contains reasons for passing one, it would have been an altogether different circumstance if there were no reasons recorded in writing by the Competent Authority for this Court to hold that the order suffered from non-application of mind. The order is neither cryptic nor perfunctory. It is in great detail. It runs into more than 250 pages. It is not the number of pages that matters, but the content in those pages which clearly indicate application of mind. We decline to accept the submission that the order suffers from non-application of mind on perusal of the entire content in the order. Every submission of the petitioner is noted, considered threadbare and answered by the Competent Authority. The Competent Authority has not left any wood on the tree. Therefore, the order does not suffer from nonapplication of mind, as is sought to be projected and contended by the petitioner. Therefore, the only circumstance which the petitioner projects apart from challenging the constitutional validity for entertainment of the subject writ petition tumbles down, as the order of the Competent Authority does bear the stamp of application of mind through the order. Therefore, it is for the petitioner to avail of the remedy of filing an appeal before the Appellate Tribunal. SUMMARY (i) The challenge to the constitutional validity of Section 37A of the Act by the petitioner is held to be maintainable and entertainable, on the fulcrum of the allegation that it is violative of Article 14 of the Constitution of India, as Article 14 is person centric, whereas fundamental rights under Articles 15, 16, 19 and 25 are citizen centric. Wherefore, a non-citizen can challenge certain laws of the nation on the ground that it is violative of Article 14 of the Constitution of India and the challenge would be restrictable only to the tenets of Article 14 of the Constitution of India. (ii) The challenge to the constitutional validity of Section 37A of the Act is rejected, as Section 37A does not suffer from any manifest arbitrariness on any ground whatsoever. (iii) The petitioner is at liberty to avail of the statutory remedy of filing an appeal before the Tribunal under sub-section (5) of Section 37A of the FEMA.
Issues Involved:
1. Maintainability of the writ petition challenging the constitutional validity of Section 37A of the Foreign Exchange Management Act, 1999 (FEMA). 2. Whether Section 37A of FEMA gives uncanalised and unguided power. 3. Whether the order passed by the authorized officer suffers from non-application of mind. Summary: Issue No. I: Maintainability of the Writ Petition The Court first addressed the maintainability of the writ petition challenging the constitutional validity of Section 37A of FEMA. It was argued that since the petitioner is a company incorporated in India but with foreign roots, it cannot challenge Indian laws under the Constitution. However, the Court held that Articles 14 and 21 of the Constitution are person-centric and not citizen-centric, allowing any person, including foreigners, to challenge laws on these grounds. Therefore, the petition challenging the constitutional validity of Section 37A on the ground of manifest arbitrariness and violation of Article 14 is maintainable. Issue No. II: Whether Section 37A of FEMA Gives Uncanalised and Unguided PowerThe Court examined the genesis and provisions of Section 37A of FEMA, which was introduced to curb black money and unauthorized foreign exchange transactions. The provision allows the authorized officer to seize equivalent value assets in India if foreign exchange, foreign security, or immovable property is suspected to be held in contravention of Section 4 of FEMA. The Court noted that several safeguards are embedded in Section 37A, including the requirement for the authorized officer to record reasons in writing, the necessity of placing the seizure order before a Competent Authority within 30 days, and the opportunity for the aggrieved person to be heard. The Court concluded that Section 37A does not suffer from manifest arbitrariness or unreasonableness, as it includes multiple checks and balances at various stages, ensuring that the power is not unbridled or unguided. Issue No. III: Whether the Order Passed by the Authorized Officer Suffers from Non-application of MindThe Court considered whether the order confirming the seizure of assets by the authorized officer lacked application of mind. It was observed that the order was detailed and included reasons for the seizure, indicating thorough consideration of the facts and submissions. The Court found no evidence of non-application of mind and held that the order was well-reasoned and justified. Consequently, the petitioner was directed to avail the statutory remedy of filing an appeal before the Appellate Tribunal under Section 37A(5) of FEMA. Summary:(i) The challenge to the constitutional validity of Section 37A of the Act by the petitioner is held to be maintainable and entertainable, on the fulcrum of the allegation that it is violative of Article 14 of the Constitution of India, as Article 14 is person-centric, whereas fundamental rights under Articles 15, 16, 19 and 25 are citizen-centric. Wherefore, a non-citizen can challenge certain laws of the nation on the ground that it is violative of Article 14 of the Constitution of India and the challenge would be restrictable only to the tenets of Article 14 of the Constitution of India. (ii) The challenge to the constitutional validity of Section 37A of the Act is rejected, as Section 37A does not suffer from any manifest arbitrariness on any ground whatsoever. (iii) The petitioner is at liberty to avail of the statutory remedy of filing an appeal before the Tribunal under sub-section (5) of Section 37A of the FEMA. ORDER:(i) The Writ Petition is rejected. (ii) The rejection of the petition would not come in the way of the petitioner availing of the remedy of appeal under Section 37A(5) of the Act, in accordance with law. (iii) In the event the petitioner would file an appeal within 30 days from the date of receipt of copy of this order, the same shall be considered by the Appellate Tribunal, in accordance with law. (iv) All contentions of the parties except the ones answered hereinabove shall remain open. Pending applications, if any, would also stand disposed, as a consequence.
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