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2009 (11) TMI 495 - HC - FEMAState Credit Scheme - scrutiny of the documents - revealed that the company while ostensibly concluding certain contracts with a the Russian Company for sale of coffee, actually exported the goods to Finland Misuse of State Credit Scheme
Issues Involved:
1. Continuation of investigations under FERA after its repeal. 2. Validity of the opportunity notice issued under Section 61(2) of FERA. 3. Validity of the appointment of the Enforcement Officer under Section 4 of FERA post-repeal. Issue-wise Detailed Analysis: Ground No. 1: Continuation of Investigations under FERA after its Repeal Section 49 of the Foreign Exchange Management Act (FEMA), 1999, addresses the repeal of the Foreign Exchange Regulation Act (FERA), 1973. Sub-section (3) prohibits courts from taking cognizance of offences under the repealed Act after two years from the commencement of FEMA. However, sub-section (4) states that offences committed under FERA shall continue to be governed by its provisions as if it had not been repealed. This implies that investigations into offences committed under FERA can continue post-repeal. The court clarified that sub-section (5)(a) of Section 49 does not prohibit the continuation of investigations but validates actions initiated under FERA to the extent they are not inconsistent with FEMA. Additionally, Section 6 of the General Clauses Act supports the continuation of investigations, legal proceedings, or remedies as if the repealing Act had not been passed. The court concluded that investigations into FERA offences could continue even after its repeal, dismissing the petitioners' argument. Ground No. 2: Validity of the Opportunity Notice Issued under Section 61(2) of FERAThe petitioners argued that the opportunity notice dated 22nd May 2002 did not comply with Section 61(2) of FERA, as it provided insufficient time to respond. The court noted that the notice is not a show-cause notice but an opportunity for the accused to show that they had the requisite permission from the Reserve Bank of India (RBI). The notice's purpose is to allow the accused to present any permission they might have had, not to justify their actions. The court observed that the petitioners did not claim to have the requisite permission in their reply. The court also noted that the respondents considered the petitioners' reply before filing the complaint, as evidenced by the selective prosecution of some noticees. The court found no merit in the argument that the three-day period was insufficient, as the petitioners did not indicate they had the requisite permission from RBI. The court dismissed the petitioners' contention, citing the Supreme Court's decision in Standard Chartered Bank v. Directorate of Enforcement, which clarified the limited scope of the opportunity notice under Section 61(2) of FERA. Ground No. 3: Validity of the Appointment of the Enforcement Officer under Section 4 of FERA Post-RepealAlthough not pressed during arguments, the petitioners contended in their written synopsis that the appointment of the Enforcement Officer under Section 4 of FERA was invalid post-repeal. They argued that FEMA does not provide for offences and violations of the nature alleged in the complaint, and investigations should be conducted by an officer not below the rank of an Assistant Director. The court found no merit in this contention, stating that no provision of FEMA invalidates the appointment of an Enforcement Officer under FERA. The court clarified that the powers of an Enforcement Officer to investigate offences under FERA do not end with the enactment of FEMA. The court concluded that the appointment of the Enforcement Officer was not inconsistent with FEMA, dismissing the petitioners' argument. Conclusion:The court dismissed the petition, finding no merit in the arguments presented by the petitioners. The court held that investigations into offences committed under FERA could continue post-repeal, the opportunity notice complied with Section 61(2) of FERA, and the appointment of the Enforcement Officer under FERA remained valid after its repeal.
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