Madras High Court Dismisses Plea By Flipkart Owners Sachin And Binny Bansal Challenging ED's Show Cause Notice For Alleged FEMA Violation

While doing so, Justice S Sounthar observed that the petitioners had an alternative remedy of raising their objections before the adjudicating authority. The court noted that as per the Act, the petitioners had remedy not just before the civil court but also had an option for a second appeal before the High Court under Section 35 of the Act. thus, the court was not inclined to exercise its jurisdiction under Article 226 to entertain the plea.

“Under the scheme of FEMA, remedy is not just available before the regular Civil Court and the same is available before the Constitutional Court, namely High Court under Section 35 of said Act. Therefore, any order passed by adjudicatory authority/second respondent in a proceeding initiated under Section 16 is liable to be scrutinized by this Court in a second appeal filed by the aggrieved party. The remedy before this Court by way of appeal on question of law cannot be treated as in-effective remedy by no stretch of imagination. Hence, I am not inclined to exercise my discretionary jurisdiction under Article 226 of Constitution of India especially when the petitioners failed to make out a case that they come under one of the exceptions to the General rule regarding availability of alternative remedy as held in Whirlpool Corporation Vs. Registrar of Trade Marks, cited supra,” the court said.

The petitioners along with some other companies had approached the High Court challenging the complaint and the show cause notices. The allegation against the petitioners was that they had contravened the provisions of Section 6 (3) (b) r/w Section 47 of the Foreign Exchange Management Act, 1999 r/w Regulations 3, 4 and 5 and para-3 and para 9(1) (B) (i) of Schedule 1 of TISPRO Regulations 2000 and annexure – B to para 2 of Schedule – 1 of TISPRO Regulations 2000 r/w consolidated FDI Policies dated 01.04.2010 and 01.10.2010.

The petitioners argued that the show cause notice was issued by the Adjudicating Authority in 2021, for an alleged violation that took place during 2009-2011 and thus there was an unreasonable delay of 10 years in initiating the proceedings. it was also argued that the show cause notice was issued without any authority of law as during that time Section 6(3) of the FEMA was omitted by Section 139 of the Finance Act of 2015 with effect from October 15, 2019. The petitioners argued that the omission would completely obliterate the effect of the omitted provision even during its existence and thus, the authorities could not have initiated action under the provision even though it was in existence at the time of the alleged offense.

The petitioners also raised bias and argued that the common counter affidavit filed by the Deputy Director was also signed by the Adjudicating Authority which would show that the Adjudicating Authority had already made up its mind and thus, no useful purpose would be served by filing an explanation to the show cause notices. Thus, contending that there was a violation of the principles of natural justice, the petitioners sought to quash the show cause notice.

On the other hand, the ED argued that the writ petition itself was not maintainable against a mere show cause notice when the petitioners had the option to submit their explanation and participate in the adjudication process. The ED also pointed out that if the petitioners were aggrieved by the order of the Adjudicating Authority, they could approach the Appellate Authority under Section 16 of the Act and thereafter could approach the High Court under Section 35 of the Act.

The ED also pointed out that the Act did not prescribe a time limit for filing a complaint. Though it agreed that the complaint had to be filed within a reasonable time, it was argued that what was reasonable time would depend upon the case which had to be looked into by the Adjudicating authority and the same could not be questioned by the High Court while exercising writ jurisdiction. The ED further pointed out that the counter affidavit was not filed on behalf of the Adjudicating Authority but only the Deputy Director and the Department. It was submitted that thus the petitioner's stand of bias was without substance.

The court noted that the existence of an alternative remedy was not a bar for invoking Article 226 when there was a violation of fundamental rights, a violation of natural justice, or the order was passed without any authority. In the present case, however, the court noted that there were no violations of the same.

The court noted that the omittance of Section 6(3) of the FEMA by way of the Finance Act could be treated as a repeal and thus, Section 6 of the General Clauses Act comes into play. Thus, the court noted that the Adjudicating Authority was entitled to issue notice for alleged contravention of Section 6(3) that existed at the relevant point of time. The court also noted that the aspects of bias and delay had to be looked into by the adjudicating authority.

Thus, the court dismissed the pleas and ordered accordingly.

Counsel for the Petitioners: Mr Arvind Datar Senior Advocate for M/s. Edward Jamesh, Mr. P. H. Arvind Pandian Senior Advocate, Mr. P. S. Raman, Senior Advocate, Mr. Srinath Sridevan, Senior Advocate for M/s. P. J. Rishikesh, Mr. Vijay Narayan Senior Advocate for M/s. N. C. Ashok Kumar, Mr. Sajan Poovaya Senior Advocate for M/s. Manu Kulkarni, Mr. Harish Narasappa Senior Advocate for M/s. P. Giridharan

Counsel for the Respondents: Mr. S. V. Raju Additional Solicitor General Assisted by Mr. N. Ramesh Special Public Prosecutor

Case Title: Sachin Bansal v The Directorate of Enforcement and Others

Citation: 2025 LiveLaw (Mad) 39

Case No: W.P.Nos.18630 of 2021 etc batches