2024 (7) TMI 1319 - HC - FEMA

Violations committed under FEMA Act - Personal hearing notice issued by the Assistant Director (SRO), directing the petitioner to appear before the adjudicating authority, i.e., the Additional Director, Directorate of Enforcement - Jurisdictional authority of the Additional Director of Enforcement - enhancement of pecuniary jurisdiction by way of notification dated 27.09.2018 to obstruct the proceedings already instituted by the Special Director (adjudicating authority) under the FEMA - HELD THAT - Once the power to appoint an adjudicating authority is conferred on the Central Government and the Central Government, in exercise of power, issued a notification, no doubt the said notification is to be effected with prospective effect. While giving prospective effect, the cases which all are pending before the other authorities must be transferred to the appropriate authority with prospective effect for the purpose of continuance of further adjudication in the manner known to law. In the present case, such a transfer was effected from the file of the Special Director to the Additional Director of Enforcement. The present case has been transferred from Special Director to the Additional Director in view of the enhancement of pecuniary jurisdiction by the Ministry of Finance, Department of Revenue, vide notification dated 27.09.2018. Thus, this Court do not find any jurisdictional error or otherwise in the matter of continuation of further proceedings under the FEMA Act, by the Additional Director of Enforcement who is empowered to deal with the cases involving amount up to Rupees Twenty Five Crores, but not less than Rupees Ten Crores. In the case of the petitioner, the allegation is for a sum of Rs.11.27 Crores (Rupees Eleven Crores Twenty Sevel Lakhs) and therefore, the transfer of the case from the Special Director to the Additional Director of Enforcement is well within the provisions of the FEMA Act and the grounds raised by the petitioner fails. No writ against a Show Cause Notice is entertainable. A writ against a Show Cause Notice can be entertained only if the notice has been issued by an incompetent authority having no jurisdiction or allegations of malafides are raised. In the present case, the learned Senior Counsel made an attempt to establish that there is a jurisdictional error which would disentitle the Additional Director (adjudicating authority) to continue the adjudication. This Court is of the opinion that the ground raised is untenable and respondents have transferred the case to the Additional Director of Enforcement in view of the notification issued by the Government of India in exercise of the powers under Section 16(1) of the FEMA Act and thus, this Court has come to an irresistible conclusion that the petitioners are not entitled to the relief as such sought for in the present writ petitions. Writ petitions stand dismissed.

Issues Involved:
1. Validity of the Personal Hearing Notice issued by the Additional Director of Enforcement.
2. Jurisdictional authority of the Additional Director of Enforcement post-notification dated 27.09.2018.
3. Retrospective application of the notification enhancing pecuniary jurisdiction.
4. Competence of the authority issuing the Show Cause Notice and continuing the inquiry.
5. Entertaining a writ against a Show Cause Notice.

Detailed Analysis:

1. Validity of the Personal Hearing Notice issued by the Additional Director of Enforcement:
The petitioners sought to quash the personal hearing notice dated 09.09.2020, issued by the Assistant Director (SRO), which directed them to appear before the adjudicating authority, the Additional Director, Directorate of Enforcement. The petitioners argued that the Show Cause Notice issued by the Special Director could not be transferred to the Additional Director, as it was impermissible under the FEMA Rules.

2. Jurisdictional authority of the Additional Director of Enforcement post-notification dated 27.09.2018:
The petitioners contended that the Special Director, being a higher authority, was the original adjudicating authority, and the proceedings could not be transferred to the Additional Director, a lower authority. The respondents argued that the notification issued by the Ministry of Finance on 27.09.2018, which revised the pecuniary jurisdiction of adjudicating authorities, empowered the Additional Director to continue the proceedings.

3. Retrospective application of the notification enhancing pecuniary jurisdiction:
The petitioners argued that the notification dated 27.09.2018, which enhanced the pecuniary jurisdiction, should not have retrospective application to obstruct proceedings already instituted by the Special Director. The respondents countered that the notification was issued under Section 16 of the FEMA Act, and such changes in pecuniary jurisdiction are implemented prospectively, affecting pending cases accordingly.

4. Competence of the authority issuing the Show Cause Notice and continuing the inquiry:
The petitioners relied on several judgments to argue that only the authority that issued the Show Cause Notice (Special Director) could continue the inquiry. However, the court noted that Section 16 of the FEMA Act empowers the Central Government to appoint adjudicating authorities and revise their pecuniary jurisdictions, which was done through the notification dated 27.09.2018. Consequently, the transfer of the case from the Special Director to the Additional Director was valid.

5. Entertaining a writ against a Show Cause Notice:
The court emphasized that a writ against a Show Cause Notice is entertainable only if the notice is issued by an incompetent authority or if there are allegations of malafides. In this case, the court found no jurisdictional error or malafides in the transfer of the case to the Additional Director. The notification issued by the Government of India was within the powers conferred by the FEMA Act, and the Additional Director was competent to continue the proceedings.

Conclusion:
The court dismissed the writ petitions, concluding that the petitioners were not entitled to the relief sought. The transfer of the case from the Special Director to the Additional Director was in accordance with the provisions of the FEMA Act and the notification dated 27.09.2018. The court found no jurisdictional error or other grounds to quash the Personal Hearing Notice. Consequently, the connected miscellaneous petitions were also closed.

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