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TMI Blog2012 (11) TMI 921X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly, the same is dismissed - Writ Petition No.24534 of 2010 and M.P. No.1 of 2010 - - - Dated:- 3-3-2011 - MR. T. RAJA J. For Petitioners: Mr.R.Krishnamurthy, Senior Counsel for M/s.Pais, Lobo Alvares For Respondent: Mr.M.Dhandapani, Special counsel for the Directorate of Enforcement. ORDER The petitioners herein challenge the impugned proceedings (No. SDE/KS/IV/5/2010) of the respondent-Special Officer, Enforcement Directorate, dated 03.09.2010, in and by which, a penalty of Rs.5,00,000/- came to be imposed under Section 13 (1) of the Foreign Exchange Management Act, 1999, on each of the petitioners herein by the aforesaid authority for the alleged contravention of the provisions under Section 6 (3)(j) of the Act on the ground that the petitioners offered personal guarantee for a loan amount of US$ 13.5 Million to a resident outside India without obtaining prior permission from the Reserve Bank of India (RBI). 2. Certain vital facts, which are necessary to be pointed out for better appreciation, are concisely outlined here-under:- M/s.Helios and Matheson Information Technology Limited, Chennai-17, (hereinafter refereed to as H M Ltd.) is a Public L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was re-transmitted to the account of VMT, Mauritius, with the State Bank of Mauritius at Mauritius, towards the consideration for the purchase of 3 subsidiaries of VMT. At this juncture, it is relevant to note that a rift originated between the petitioner-company and the successive Management of the VMT Mauritius on the very transactions referred to above which gave rise to various proceedings including the impugned proceedings under challenge herein. Despite fulfilment of the terms and conditions as contained in the SPA on the part of H L Ltd., VMT Mauritius committed breach of the terms on account of certain disputes that arose between Rajeev Shawney, the present Chairman of VMT and Pawan Kumar, the then CEO/Chairman of VMT Mauritius. Arbitration Proceedings initiated thereupon by the petitioners to resolve the dispute arose with the Management of VMT Mauritius are still pending. The said Rajeev Shawney is also said to have made false and defamatory allegations against H M Ltd. and the petitioners apart from lodging a false and frivolous complaint against them alleging commission of serious offences of fraud. Inasmuch as the successive Management of VMT Mauritius alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he basis of the explanation offered to the effect that the provisions under Section 6(3)(j) have no application to their case at all, the writ petition came to be disposed of with a direction to the Department to consider such objections within a period of four weeks from the date of receipt of a copy of the order. After disposal of the aforesaid writ petitions, by letter dated 15.07.2010, sent by the Advocates of the petitioners to the respondent-Directorate, it was stated that there was no need for the petitioners to attend the scheduled personal hearing fixed on 16.07.2010. The opportunities given to the petitioners for personal hearings on 12.07.2010 and 14.07.2010 were not availed of by the petitioners. Since the petitioners did not desire to attend the personal hearings as expressed by them in the aforesaid letter and sought to consider their cases based on the explanation offered on 01.07.2010, the authority, taking note of the time-limit prescribed in the order of the learned single Judge, after considering the case of the petitioners as detailed in their explanation, ultimately declined to accept the same and, by the proceedings challenged herein, imposed a penalty of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sub-Section (2), the transactions involved herein would only fall under Section 6 (2) of the Act and the purview of section 6(3) (j) is clearly excluded from application. (iii) When all the transactions had been done through the Chennai Branch of the SBM after obtaining advice of Price waterhouse Coopers Pvt. Ltd and Khaitan and Co., if in fact permission of the RBI was necessary, the Chennai Branch of the SBM should have returned the papers submitted by the petitioners-company, instructing them to obtain the requisite permission from the RBI. At any rate, for the default, if any, committed by the authorised dealer-Chennai Branch of SBM, the petitioners cannot be held responsible and the authorized dealer, who acted as an agent of the RBI alone is answerable, however, no charge was ever levelled against the dealer. (iv) After disposal of W.P. Nos.15059 and 15060 of 201, vide order dated 13.07.2010, the respondent was directed to consider the objections submitted by the petitioners on 01.07.2010 and the said authority, having formed an opinion to impose huge penalty on the petitioners declining to accept the explanation offered, before passing the impugned proceedings, sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itated in the second round of litigation before this Court, by the very same parties may be rejected on the simple ground that as against the present impugned order passed subsequent to the direction issued in W.P. Nos.15059 and 15060 of 2010 by duly considering the issue in the light of the explanation offered by the petitioners, an efficacious alternative remedy under Section 19 is available by way of Appeal before the ATFE and all the grounds raised herein can be very well agitated and canvassed before the said Forum. When all dealings pertaining to permissible capital account transactions as governed by FEMA are stipulated by the RBI, prior permission of the RBI must have been obtained by the petitioners who stood guarantors to a non-resident and the present case is clearly covered by Regulation-3 of FEM (Guarantees) Regulation 2000. The respondent even before disposal of the earlier writ petitions on 13.07.2010, fixed the date of personal hearing on 12.07.2010 and even thereafter, they did not avail the opportunity of personal hearing for which the dates given were 14.07.2010 and 16.07.2010. If the petitioners were really looking for an ample opportunity, despite the expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Sale Purchase Agreement duly signed by both sides on 11.05.2005 and it was agreed that the petitioner-company will acquire 100% shares of VMT for a consideration of US$ 15 million, with an understanding that the consideration will be first transferred to VMT Ltd. whereupon the amount will be re-transferred to H M Ltd., who in tun will issue redeemable preference shares in favour of VMT and those shares will be redeemed after 18 months from the date of issue. VMT applied for loan from the State Bank of Mauritius at Mauritius and on the basis of the letter of lien and guarantee furnished by the petitioners, the said amount released by SBM at Mauritius was credited to the petitioner's account at the Chennai Branch of SBM on 29.06.2005. In respect of the said transaction, the RBI received a complaint from the present Chairman of VMT stating that the said transaction was fraudulently entered into by collusion between the petitioners and the erstwhile Chairman of the VMT, for, instead of crediting the acquisition proceeds into the accounts of VMT maintained with HSBC Bank, the sum was credited to the VMT's account with the SBM at the Mauritius Branch. The said complaint received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... violation of the principles of natural justice and, acting upon the plea of the petitioners that they restrict the prayer to the extent that their grievance would get redressed if a direction was issued to the respondents to consider their claim of non-applicability of Section 6(3) (j) to their case on the basis of the detailed explanation submitted on 01.07.2010, ultimately directed the respondents to consider those objections and pass orders within a period of four weeks from the date of receipt of a copy of the order. 8. At this juncture, it must be taken note of that even during the pendency of the writ petition, personal hearing was scheduled on 12.07.2010 and the writ petition came to be disposed of on 13.07.2010. Two more opportunities were given to the petitioners to attend the personal hearings scheduled on 14.07.2010 and 16.07.2010, but the petitioners did not avail it of. The petitioners could have very well utilised the further opportunity of personal hearing coupled with the direction of this Court for consideration of the case by the respondent in the light of the detailed explanation offered on 01.07.2010, to effectively defend their case and substantiate the cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Bench decision of this Court rendered in Thansingh Nathmal and others vs. The Superintendent of Taxes, Dhubri, reported in AIR 1964 SC 1419, which was also a decision in a fiscal law. Commenting on the exercise of wide jurisdiction of the High Court under Article 226, subject to self-imposed limitation, this Court went on to explain: "The High Court does not therefore act as a court of appeal against the decision of a court or tribunal, to correct errors of fact, and does not by assuming jurisdiction under Article 226 trench upon an alternative remedy provided by statute for obtaining relief. Where it is open to the aggrieved petitioner to move another tribunal, or even itself in another jurisdiction for obtaining redress in the manner provided by a statute, the High Court normally will not permit by entertaining a petition under Article 226 of the Constitution the machinery created under the statute to be bypassed, and will leave the party applying to it to seek resort to the machinery so set up." (Emphasis added) 37. The decision in Thansingh (supra) is still holding the field. 38. Again in Titaghur Paper Mills Co. Ltd. and another vs. State of Orissa and another [AIR 1983 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition as outlined above which directly applies to the given case, the learned Senior Counsel endeavoured to draw support to his argument through the very same case law cited supra wherein reference was made to an earlier decision rendered in Seth Chand Ratan vs. Pandi Durga Prasad (D) By Lrs. and Ors (2003 (5) SCC 399 for the proposition that when a right or liability is created by a Statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must be had to that particular statutory remedy before seeking the discretionary remedy under Article 226 of the Constitution; however, such principle is subject to one exception, namely, where there is a complete lack of jurisdiction of the Tribunal to take action or there has been a violation of rules of natural justice or where the tribunal acted under a provision of law which is declared ultra vires. In such cases, notwithstanding the existence of such a tribunal, the High Court can exercise its jurisdiction to grant relief. 11. Of course, the learned Senior Counsel may be right in citing the said decision if the circumstances herein are similar to that of those involved in Ratan's case, but i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the decision or order of the Appellate Tribunal to him on any question of law arising out of such order. Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. 14. When an argument was advanced before the Apex Court that under Section 35, only appeals from final order could be filed, the Court, explaining the concept of the provision and its encompassing operation, vividly answered thus in Raj Kumar Shivhare's case:- 23.The argument that under Section 35 only appeals from final order can be filed has been advanced on a misconception of the clear provision of the Section itself. The Section clearly says that from `any decision or order' of the Appellate Tribunal, appeal can be filed to the High Court on a question of law. 24.The word `any' in this context would mean `all'. We are of this opinion in view of the fact that this Section confers a right of appeal on any person aggrieved. A right of appeal, it is well settled, is a creature of Statute. It is never an inherent right, like that of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners were deprived of an effective opportunity in placing their case before the authority by, in fact, non-supply of any crucial document? (iv) whether Circular No.29, dated 27.03.2006, has any applicability and is helpful to the case of the petitioners; etc. in regard to the allegation in the complaint which gave rise to the enquiry and proceedings ie., instead of crediting the acquisition proceeds to the account of VMT maintained with the HSBC Bank, the proceeds were credited to VMT's account with SBM at Mauritius to the wrongful benefit of the erstwhile chairman of the VMT , the petitioners could have challenged the order passed by the original authority before the ATFE under Section 19 of the Act and thereafter, if still aggrieved by any order passed by the Appellate Tribunal, they have further appeal remedy before the High Court u/s.35 of the Act as has been consistently held by the Apex Court in its various decisions as referred to above while dealing with alike cases. Even accepting the argument of the learned Senior Counsel for the petitioners that the instant case is an exceptional case where this Court can proceed with the matter, I am of the considered opi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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