Supreme Court Dismisses ED's Plea Against HC Order Allowing NDTV To Seek Compounding Of Alleged FEMA Violations

The Supreme Court on Monday (August 12) dismissed the plea by Directorate of Enforcement (ED) challenging a Bombay High Court order that allowed New Delhi Television (NDTV) to pursue compounding proceedings for alleged violations of the Foreign Exchange Management Act (FEMA) before the Reserve Bank of India (RBI).

A bench of Justice Abhay Oka and Justice Augustine George Masih ruled that there was no case for interference with the HC's order, which had directed that the compounding application be decided in accordance with the law. The HC also made significant observations concerning the role and independence of high-functioning institutions like the RBI, ED, and the CBI.

In its brief order, the Supreme Court stated,

“We found no error with the effective order passed by the High Court in Paragraph 109. Paragraph 109 of the impugned judgment itself records that the application for compounding shall be decided in accordance with law. No case for interference made out.”

The Supreme Court last week granted the ED additional time to address its plea as a "last chance" for the agency. The Court had been hearing the ED's plea since May 2024, following a gap of nearly three and a half years since the last hearing in December 2020. During this period, the case had been adjourned three times at the instance of the ED. Justice Oka had remarked that there might be a change in the ED's stand due to changed circumstances, suggesting a possible shift in the agency's approach.

During the proceedings today, Advocate Zoheb Hossain for ED said that the HC proceeded on the presumption that compounding is a matter of right. However, Justice Oka pointed out that after a long discussion, the HC ultimately directed the RBI to decide the application according to law.

The matter traces back to alleged FEMA violations by NDTV, a prominent news broadcaster founded by Prannoy Roy and Radhika Roy in 1988. NDTV faced adjudication proceedings initiated by the ED for these alleged contraventions. Thereafter, NDTV decided to seek compounding of the violations and submitted the necessary applications to the RBI. However, the applications were returned, prompting NDTV to file a writ petition challenging the actions of both the RBI and the ED.

The Bombay HC, in its impugned order, directed the RBI to consider the compounding applications filed by NDTV emphasizing that the compounding proceedings should proceed strictly in accordance with the law.

Senior Advocate Janak Dwarkadas, representing NDTV, had argued that the statutory position and status of these institutions were being undermined. While the HC disagreed with this contention, it acknowledged the distressing nature of such doubts and emphasized that these beliefs should not be entertained in court, as they could undermine the credibility and effectiveness of these institutions.

The HC further stressed the importance of maintaining public trust and confidence in these institutions, noting that any political interference could shake the foundations of these entities. The judgment underscored that institutions like the ED, which enforce stringent laws such as FEMA and the Prevention of Money Laundering Act (PMLA), are crucial for safeguarding India's foreign exchange resources, ensuring balanced payment management, and protecting the constitutional framework.

The HC expressed its hope that in the future, it would not have to make similar observations and urged all parties involved to refrain from unnecessary criticism of these institutions. The ED challenged this judgment before the Supreme Court in the present appeal.

Case no. – SLP(C) No. 2771/2019

Case Title – Directorate of Enforcement v. New Delhi Television Limited 

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