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2026 (7) TMI 660 - BOMBAY HIGH COURTFEMA

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Pre-deposit non-compliance under FEMA did not bar restoration where readiness to pay and medical hardship were shown.
Dismissal of appeals for non-compliance with the statutory pre-deposit under FEMA was interfered with where the appellant's age and serious medical condition were undisputed and readiness to deposit was shown. The Bombay HC held that, because the appeals had been closed without merits solely for non-payment of the pre-deposit and the respondent raised no objection if compliance was made, restoration on a time-bound deposit condition would serve the ends of justice. The dismissal order was quashed and the appeals were restored subject to payment of Rs. 7.5 lakhs within four weeks.

2026 (7) TMI 659 - KARNATAKA HIGH COURTFEMA

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Sub judice protection under FEMA barred fresh notice and complaint based on the same cause of action, leading to quashing.
A show-cause notice and complaint under FEMA were found unsustainable because they arose from the same cause of action already under challenge in a pending writ petition concerning Section 37A proceedings. The court treated the later notice and complaint as a fresh form of the same disputed action, and noted that a status quo order was already operating in the earlier matter. As the issue remained sub judice and protected by the subsisting interim order, continuation of the later proceedings was not permitted, and the notice and complaint were quashed.

2026 (6) TMI 1106 - BOMBAY HIGH COURTFEMA

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Jurisdiction under repealed foreign exchange law failed where specific empowerment was absent for issuing show cause notices.
Show cause notices issued under the repealed Foreign Exchange Regulation Act were held without jurisdiction because the officer was not specifically empowered by the Central Government under Section 50. A general or deemed appointment under the Foreign Exchange Management Act could not replace the specific authority required to initiate proceedings under the repealed enactment. The Court followed its prior Division Bench view on the same officer, and, no distinguishing circumstance or stay having been shown, quashed the notices and set aside the proceedings.

2026 (6) TMI 1016 - MADRAS HIGH COURTFEMA

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Review jurisdiction cannot reopen FEMA merits when statutory remedies remain available and no apparent error is shown.
Review jurisdiction cannot be used to reopen the merits of a writ order where the earlier dismissal rested on the availability of statutory remedies under FEMA. The court treated complaints about delay in issuing the show cause notice, reasonable time, the alleged pre-notification nature of the violation, FDI policy, and factual questions on exit from the company or group company status as matters for the adjudicating authority. It also noted that FEMA provides further appellate remedies, including on questions of law, which reinforced the limited scope of review. No error apparent on the face of the record was shown, and the review applications were dismissed.

Review jurisdiction - Alternative statutory remedy under FEMA - Error apparent on the face of the record - Delay in issuance of show cause notice - Reasonable period in penal proceedings - Violation of Foreign Exchange Management Act (FEMA) and Transfer or Issue of Security by a Person Resident Outside India Regulations, 2000 (TISPRO Regulations) - Preliminary objection regarding maintainability of the writ petitions Delay in issuance of show cause notice - Reasonable period in penal proceedings - HELD THAT: - The Court held that the writ order had already considered the objection founded on delay and had rightly treated the reasonableness of such delay as a fact-dependent matter to be urged before the adjudicating authority. It further held that Commissioner of Income Tax and others Vs. Roca Bathroom Products Pvt. Ltd and others [2022 (6) TMI 848 - MADRAS HIGH COURT] which arose in the context of reassessment under the Income-tax Act, could not be extended as a general bar to initiation of proceedings under a penal provision. Likewise, State of Punjab and others vs. Bhatinda District Cooperative Milk Producers Union Ltd. [2007 (10) TMI 300 - SUPREME COURT] was treated as turning on the scheme of the statute there considered and not as laying down an inflexible rule of universal application. Relying on the principle noticed through Union of India and others Vs. Citi Bank [2022 (8) TMI 1107 - SUPREME COURT] and Government of India Vs. Citedal Fine Pharmaceuticals Madras and others [1989 (7) TMI 100 - SUPREME COURT], the Court reiterated that, in the absence of a prescribed limitation period, whether notice was issued within a reasonable period must depend on the facts of the individual case and is to be examined by the competent officer, subject to the appellate remedies under FEMA. [Paras 8, 10, 12] No error apparent was shown in the writ order on the question of delay, and the plea was left open to be pursued before the adjudicating authority. Alternative statutory remedy under FEMA - Challenge to show cause notice - Merits reserved for adjudication - HELD THAT: - The Court held that the contentions regarding the timing and applicability of the RBI notification, the status of the FDI policy as against rules or regulations under FEMA, the applicants' exit from the company, and the absence of a definition of "Group Company" all pertained to the merits and, in some instances, to disputed questions of fact. Since the writ petitions had been disposed of on the preliminary ground that an effective statutory hierarchy existed under FEMA, comprising adjudication, appeal to the Appellate Tribunal and further appeal to the High Court on a question of law, those matters were required to be raised before the adjudicating authority and not examined in review. The Court therefore found no basis to revisit its earlier conclusion that the remedy under the Act was efficacious. [Paras 15, 16, 18, 19, 20] The merits of the alleged FEMA and TISPRO violations were left to the statutory authorities, and the review court declined to re-examine them. Final Conclusion: The review applications were dismissed. The Court held that no error apparent was shown in the earlier writ order, that the objection of delay remained open for consideration by the adjudicating authority, and that all merits-based FEMA contentions must be pursued within the statutory appellate framework.

2026 (6) TMI 802 - GAUHATI HIGH COURTFEMA

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Issues: (i) Whether the writ petitions were maintainable against an Authorised Dealer Category-I Bank; (ii) whether the petitioner was liable to be non-suited for suppression of material facts; (iii) whether the bank had authority under the FEMA-RBI framework and the facility agreement to scrutinize sanctions-related concerns and refuse processing of the transactions; and (iv) whether the impugned refusal was arbitrary, irrational, mala fide or otherwise amenable to interference under Article 226.

Issue (i): Whether the writ petitions were maintainable against an Authorised Dealer Category-I Bank.

Analysis: The bank, though private, was acting in the capacity of an Authorised Dealer under the foreign exchange regulatory framework. The challenge was founded on arbitrariness in the exercise of a function having a public law element. Contractual relations did not, by themselves, exclude judicial review where the impugned action was tested on constitutional standards.

Conclusion: The writ petitions were maintainable.

Issue (ii): Whether the petitioner was liable to be non-suited for suppression of material facts.

Analysis: A litigant invoking writ jurisdiction must make full disclosure, but every omission or disputed factual assertion does not warrant rejection at the threshold. The alleged Iranian nexus was itself part of the substantive controversy and the materials relied upon by the bank were placed before the Court for scrutiny.

Conclusion: The petitioner was not to be non-suited on that ground.

Issue (iii): Whether the bank had authority under the FEMA-RBI framework and the facility agreement to scrutinize sanctions-related concerns and refuse processing of the transactions.

Analysis: Section 10(5) of the Foreign Exchange Management Act, 1999 obliges an authorised person to obtain declarations and information sufficient to satisfy itself that the transaction will not involve contravention or evasion of the Act or the directions issued thereunder. The facility agreement also contained continuing sanctions-compliance representations and expressly reserved a right in favour of the bank to refuse processing of transactions that violate or may violate sanctions obligations. On receipt of information raising serious concerns about the accuracy of the petitioner's declarations, the bank was entitled to undertake enhanced scrutiny and decline to proceed.

Conclusion: The bank possessed the requisite authority.

Issue (iv): Whether the impugned refusal was arbitrary, irrational, mala fide or otherwise amenable to interference under Article 226.

Analysis: The bank did not act mechanically. It sought clarifications, afforded opportunity to explain, undertook compliance review, and acted within the contractual and regulatory framework. No material was shown to establish mala fides, collateral purpose, procedural unfairness, or perversity in the decision-making process. The Court did not find it necessary to conclusively determine the underlying factual controversy regarding the origin and routing of the goods.

Conclusion: The impugned refusal did not suffer from arbitrariness, mala fides or procedural impropriety warranting interference.

Final Conclusion: The challenge failed on merits because the bank's decision was supported by the statutory duties of an authorised dealer and by the express sanctions-related terms of the parties' agreement, leaving no ground for writ interference.

Ratio Decidendi: An authorised dealer bank, when confronted with declarations and subsequent information raising sanctions-related compliance concerns, may lawfully undertake enhanced scrutiny and refuse to process the transaction if the declarations are not satisfactorily reinforced, especially where the underlying contract expressly reserves such a right.

Sanctions compliance scrutiny by authorised dealer bank upheld where disclosures raised serious transaction-risk concerns.
A writ petition against an Authorised Dealer Category-I bank was held maintainable where the challenge alleged arbitrariness in the exercise of a public law function. The petitioner was not non-suited for alleged suppression, because the disputed Iranian nexus formed part of the substantive controversy and the relevant materials were before the Court. The bank had authority under FEMA and the facility agreement to seek further declarations, scrutinise sanctions-related concerns, and refuse processing when the petitioner's disclosures raised compliance doubts. Its refusal was upheld as non-arbitrary and non-mala fide, with no procedural impropriety shown, so writ interference was declined.

Maintainability of writ against private bank performing public law function - Authorised Dealer Bank due diligence in foreign exchange transactions - Contractual sanctions compliance in merchant trade transactions - Judicial review of refusal to process foreign exchange transaction - Suppression of material facts - Enhanced due diligence - Contractual sanctions compliance - Judicial review of administrative action - Arbitrariness - Mala fides - Procedural impropriety - Commercial transaction compliance Maintainability of writ against private bank performing public law function - Public law element in contractual banking action - HELD THAT: - In ABL International Ltd. v. Export Credit Guarantee Corporation of India Ltd. [2003 (12) TMI 584 - SUPREME COURT], the Apex Court held that a writ petition is not rendered non-maintainable merely because the dispute arises in a contractual setting, particularly where allegations of arbitrariness and public law infirmity are raised. In Kumari Shrilekha Vidyarthi v. State of U.P. [1990 (9) TMI 323 - SUPREME COURT], the Apex Court emphasized that contractual dealings do not create an area immune from constitutional scrutiny where public law considerations are involved. Though a private bank does not become amenable to writ jurisdiction merely because it is regulated, the impugned action here was not treated as a purely private commercial act. The bank was acting as an Authorised Dealer Category-I Bank under the FEMA-RBI framework while processing foreign exchange transactions, and the challenge was founded on alleged arbitrariness in the exercise of that regulatory function. The existence of contractual relations did not exclude judicial review where the action carried a public law element. The preliminary objection to maintainability was rejected. Suppression of material facts - Clean hands in writ jurisdiction - HELD THAT: - The Court accepted the principle that a writ petitioner must make full and fair disclosure, but held that every omission or disputed factual assertion does not justify dismissal at the threshold. Since the alleged Iranian nexus itself formed part of the principal controversy and the materials relied on by the bank were already before the Court for scrutiny, the objection as to clean hands was not accepted as a preliminary bar. [Paras 53, 54, 55, 56, 57] The plea of suppression was rejected as a ground for summary dismissal. Authorised Dealer Bank due diligence in foreign exchange transactions - Contractual sanctions compliance in merchant trade transactions - Refusal to process transaction on sanctions-related concerns - The bank had authority under the governing statutory, regulatory and contractual framework to undertake sanctions-related scrutiny and to refuse processing of the merchant trade transactions when subsequent material cast doubt on the petitioner's declarations. - HELD THAT: - Section 10(5) of FEMA required the Authorised Dealer Bank to obtain declarations and information sufficient to satisfy itself that the transaction did not involve contravention or evasion of the applicable framework; it was therefore obliged to carry out scrutiny, verification and enhanced due diligence where circumstances so warranted. The RBI framework for merchanting trade transactions likewise required the bank to satisfy itself regarding genuineness, bona fides and compliance. Independently, the facility agreement contained continuing representations on accuracy of information and specific sanctions clauses covering origin of goods, shipment routes, vessels, countries, participating entities and correspondent banking arrangements, while expressly reserving to the bank the right to refuse processing of a transaction which violates or may violate sanctions. The petitioner had furnished declarations stating that the transactions did not involve a sanctioned jurisdiction or goods sourced from such jurisdiction. Once material later came to the bank's notice indicating an Iranian nexus and creating serious doubt as to those declarations, the bank was entitled and bound to reassess the transactions. The Court held that the legality of that action did not depend on treating OFAC sanctions as enforceable municipal law in India; the matter stood concluded on the contractual undertakings, the declarations furnished, and the bank's regulatory obligations. The plea of lack of prior knowledge on the petitioner's part did not dilute the bank's entitlement and duty to act on subsequently received information. [Paras 127, 131, 133, 134, 147] The bank's refusal to process the transactions was held to be traceable to its statutory obligations and express contractual rights. Judicial review of refusal to process foreign exchange transaction - Decision-making process in banking compliance review - Limits of writ court in disputed commercial facts - HELD THAT: - The Court held that the writ proceedings were not concerned with conclusively determining every disputed fact regarding origin of goods, vessels, routing or the precise extent of the Iranian nexus. The relevant question was whether material existed that reasonably triggered the bank's contractual and regulatory obligations and whether the bank acted within that framework. On the record, the bank did not reject the transactions at the threshold; it sought clarifications, exchanged communications with the petitioner, afforded opportunities to explain, and subjected the matter to internal compliance review. The considerations relied on by the bank were germane to its role under FEMA, RBI directions, KYC, AML, due diligence and the parties' sanctions-related contractual stipulations. In those circumstances, the Court declined to substitute its own assessment for that of the bank and held that the refusal could not be characterised as arbitrary or unreasonable. [Paras 164, 165, 170, 171, 172] No ground for interference in writ jurisdiction was made out. Final Conclusion: The writ petitions were held maintainable, but the challenge failed on merits. The Court held that the Authorised Dealer Bank acted within its statutory duties under the FEMA-RBI regime and within its express contractual rights in refusing to process the transactions after sanctions-related concerns emerged, and accordingly declined interference under Article 226.

2026 (6) TMI 801 - KARNATAKA HIGH COURTFEMA

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FEMA residence test under Section 2(v) kept immovable property and remittance transactions outside regulatory violations.
Residence status under FEMA turned on whether the respondents fell within the statutory definition of "person resident in India" under Section 2(v). On the stated facts, their stay in India for more than 182 days, business visa entry, business activity in India, RBI clarification, and routing of consideration and remittances through banking channels with FIRC support took the matter outside the statutory exceptions. As a result, the immovable property, capital account, investment and establishment regulations were treated as inapplicable, and no perversity or legal error in the Tribunal's appreciation of evidence was shown. The note states that the finding of no FEMA violation and the setting aside of confiscation and penalty were upheld.

Definition of "person resident in India" under Section 2(v) - Acquisition of immovable property in India by foreign nationals - Applicability of FEMA regulations to residents - violation of various provisions of FEMA read with the provisions of various extant Regulations - Joint Director issued a show cause notice - Substantial compliance - Perverse finding - Jurisdictional interference - Alternative remedy Person resident in India - Business visa and residence exceeding 182 days - Purchase of immovable property in India - HELD THAT: - The Court held that, once the respondents' residence in India for more than 182 days during the preceding financial year was not disputed, the definition in Section 2(v)(i)(B) had to be applied in light of the purpose of their stay. Since they had come to India on a business visa and were carrying on business in India, they did not fall within the exclusionary part of the definition. On that basis, the Appellate Tribunal was justified in treating them as persons resident in India. Consequently, the regulations concerning investment in firm or proprietary concern in India, permissible capital account transactions, acquisition and transfer of immovable property in India, and establishment of branch or office, insofar as they apply to persons resident outside India, were held inapplicable. The Court further noted that the purchase consideration had come through legal channels, the RBI had indicated that no prior permission was required if Section 2(v) was satisfied, and no perversity or error in the Tribunal's findings had been shown. [Paras 14, 15, 16, 17, 19] The order of the Appellate Tribunal setting aside confiscation and penalty was upheld, and the appeal was dismissed. Infructuous writ petition - Confiscated property - HELD THAT: - The Court observed that the writ petition was founded on the confiscation order passed by the Joint Director, which had already been quashed by the Appellate Tribunal. Since the Court affirmed the appellate order, no further adjudication in the writ petition remained necessary. [Paras 22] The writ petition was disposed of as infructuous. Final Conclusion: The Court affirmed the Appellate Tribunal's view that the concerned respondents were persons resident in India under FEMA and that the regulations relied upon by the Directorate were inapplicable to them; the appeal was therefore dismissed. In consequence, the connected writ petition was disposed of as infructuous.

2026 (6) TMI 1371 - MADRAS HIGH COURTFEMA

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Issues: (i) Whether a civil suit seeking declaration that a sale deed is null and void on the ground of violation of the Foreign Exchange Management Act, 1999 is barred by the exclusion of civil court jurisdiction under the Act. (ii) Whether a sale of agricultural property in favour of a non-resident Indian, said to be in contravention of the Foreign Exchange Management Act, 1999 and the allied regulations, is void by reason of Section 23 of the Indian Contract Act, 1872 and Section 6(h) of the Transfer of Property Act, 1882.

Issue (i): Whether a civil suit seeking declaration that a sale deed is null and void on the ground of violation of the Foreign Exchange Management Act, 1999 is barred by the exclusion of civil court jurisdiction under the Act.

Analysis: Section 34 of the Foreign Exchange Management Act, 1999 expressly excludes the jurisdiction of the civil court in respect of matters that the adjudicating authority, appellate tribunal or special director (appeals) is empowered to determine. The dispute regarding alleged contravention of FEMA was already taken up before the statutory authorities, which imposed penalty. The declaration sought before the civil court was not independent of the FEMA issue but was consequential to it, and therefore the civil suit could not be sustained on that aspect.

Conclusion: The issue is answered in favour of the appellants and against the respondent.

Issue (ii): Whether a sale of agricultural property in favour of a non-resident Indian, said to be in contravention of the Foreign Exchange Management Act, 1999 and the allied regulations, is void by reason of Section 23 of the Indian Contract Act, 1872 and Section 6(h) of the Transfer of Property Act, 1882.

Analysis: A contravention of FEMA does not, by itself, render the transaction void. The statutory scheme under FEMA provides for adjudication, penalty and, where warranted, confiscation, and the authorities in the present case chose to impose penalty without confiscating the property. Regulation 3(b) of the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000 also indicates that transfer of immovable property to a person resident in India is not prohibited in the manner contended. The transaction therefore could not be treated as forbidden by law so as to fall within Section 23 of the Indian Contract Act, 1872 or Section 6(h) of the Transfer of Property Act, 1882.

Conclusion: The issue is answered in favour of the appellants and against the respondent.

Final Conclusion: The decree for partition was sustained in respect of the ancestral properties, but the declaration and consequential reliefs relating to the separate properties dealt with in the impugned sale transaction were set aside.

Ratio Decidendi: A contravention of FEMA does not ipso facto make a transaction void, and where the statute provides a self-contained adjudicatory mechanism with penalties, the civil court cannot declare such transaction void on the basis of the alleged FEMA violation.

FEMA contravention does not automatically void a sale deed; civil court relief was barred on the same issue.
A civil suit seeking to declare a sale deed null and void for alleged FEMA contravention was not maintainable where the statutory authorities under FEMA had already adjudicated the breach and imposed penalty, because the civil court cannot decide a matter assigned to the Act's self-contained mechanism. The court also held that a FEMA violation does not, by itself, render a sale void under Section 23 of the Indian Contract Act or Section 6(h) of the Transfer of Property Act; in the absence of confiscation, the transaction was not shown to be forbidden by law. The partition decree was sustained for ancestral properties, but declaration and consequential reliefs concerning the sale transaction were set aside.

Bar of civil court jurisdiction under FEMA - Contravention of FEMA and validity of transfer of agricultural land to Non-Resident Indian - Applicability of Section 23 of the Contract Act and Section 6(h) of the Transfer of Property Act to FEMA contraventions - Civil suit seeking declaration that a sale deed is null and void on the ground of violation of the Foreign Exchange Management Act, 1999 - sale of agricultural property in favour of a non-resident Indian - Entitlement to partition and separate possession of her share in Schedule 'A' property Bar of civil court jurisdiction under FEMA - Declaratory suit challenging transfer for FEMA contravention - HELD THAT: - It is not in dispute and in fact, even the case of the plaintiff herself that Schedule 'B' properties were the separate properties of her father. The third defendant has purchased both Schedule 'A' and Schedule 'B' properties from Jayaraman under registered sale deed dated 24.10.2005. Jayaraman sold both Schedule 'A' and Schedule 'B' properties, executing the said document for himself and also as power agent of the first defendant, his son. Pending the suit, the third defendant settled both Schedule 'A' and Schedule 'B' properties, in favour of the 4th defendant, his mother, by registered sale deed dated 20.12.2012. In view of the above settlement, the fourth defendant was also impleaded in the suit. The authorities have power under the provisions of FEMA to confiscate properties, apart from levying fine and also pass an order of imprisonment for a term extending upto 5 years, in addition to the fine. Section 13 deals with contravention and penalties. Section 13(2) empowers the Adjudicating Authority, in addition to imposing penalty, to also confiscate a property, in respect of which contravention has taken place. In the present case, the contravention is in respect of Schedule 'B' properties. Thus, the Adjudicating Authority has in its wisdom thought it fit to only impose penalty and has not invoked powers available under Section 13(2) of FEMA, to confiscate the Schedule 'B' properties. The Court held that Section 34 of FEMA expressly bars the jurisdiction of the civil court in respect of matters which the Adjudicating Authority, the Appellate Tribunal or the Special Director (Appeals) is empowered to determine. The plaintiff's challenge to the sale deed was founded entirely on alleged violation of FEMA, and the plaintiff had in fact already invoked the FEMA machinery, resulting in adjudication and imposition of penalty, which was confirmed in appeal. Since the relief of partition in respect of Schedule 'B' property was only consequential upon invalidating the sale, that consequential relief could not survive independently once the declaratory relief itself was barred. FEMA was treated as a complete code on the question of contravention, penalties, confiscation and appellate remedies, and therefore the courts below erred in overlooking the width of the statutory bar. [Paras 29, 30, 36, 37, 38] The decree declaring the Schedule 'B' sale void was unsustainable for want of civil court jurisdiction under Section 34 of FEMA. FEMA contravention not rendering transaction void - Transfer of agricultural land to Non-Resident Indian - Section 23 of the Contract Act and Section 6(h) of the Transfer of Property Act - HELD THAT: - The Court held that FEMA does not declare such acquisition void; instead, it provides a regulatory framework of adjudication, penalty, confiscation and compounding. Where the statute itself contemplates condonation and gives the authority discretion to impose penalty or confiscate the property, the transaction cannot be treated as one forbidden by law so as to automatically attract Section 23 of the Contract Act. The adjudicating authority in the present case, despite finding contravention, consciously imposed penalty alone and did not confiscate the property. Relying on Vijay Karia [2020 (2) TMI 628 - SUPREME COURT] and applying the distinction between FERA and FEMA, the Court held that, unlike FERA, FEMA does not contain provisions making offending transactions void. The Court further noted that Regulation 3(b) permits transfer of any immovable property in India to a person resident in India, and the subsequent settlement in favour of the transferee's mother had also been noticed by the FEMA authorities while restricting the consequence to penalty. Asha John Divianathan [2021 (3) TMI 92 - SUPREME COURT] was distinguished as a decision rendered in the context of FERA and its prohibitory scheme. [Paras 36, 37, 39, 40, 41] The sale of Schedule 'B' property could not be declared null and void merely because it contravened FEMA, and the contrary view of the courts below was set aside. Partition of ancestral property by daughter - Concession as to ancestral character of Schedule 'A' property - HELD THAT: - The Court found that the appellants had not denied the ancestral character of Schedule 'A' property and had, even in the grounds of second appeal, accepted that the plaintiff was a coparcener in respect of those properties. In the absence of any sustainable challenge to that part of the decree, there was no reason to deny partition in respect of Schedule 'A' property. [Paras 19, 20] The decree for partition relating to Schedule 'A' property was confirmed. Final Conclusion: The Second Appeal was partly allowed. The decree declaring the Schedule 'B' transfer void and granting consequential relief in respect of that property was set aside, while the decree for partition in respect of Schedule 'A' ancestral property was confirmed.

2026 (5) TMI 207 - DELHI HIGH COURTFEMA

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Foreign exchange contravention requires proof of dealing or unauthorised conversion; mere receipt of rupees from NRE account is insufficient.
Receipt of Indian rupees from an NRE account did not constitute contravention of section 8(1) or section 8(2) of the Foreign Exchange Regulation Act, 1973. The court noted that section 8(1) targets dealings in foreign exchange, including purchase, acquisition, transfer, lending or exchange, and its Explanation cannot be extended to a mere receipt of Indian currency. Section 8(2) also was not attracted because there was no unauthorised conversion between Indian currency and foreign currency at an impermissible rate. In the absence of proof of dealing in foreign exchange or an unauthorised conversion transaction, the penalty could not stand.

Dealing in foreign exchange - receipt of a cheque in Indian currency from an NRE account - Contravention of Section 8(1) of the Foreign Exchange Regulation Act, 1973 - Applicability of the Section 8(2) - scope of restriction on foreign exchange dealings - Unauthorised currency conversion. Dealing in foreign exchange - NRE account transactions - unauthorised currency conversion - HELD THAT:- The Court held that the determinative requirement under Section 8(1) is dealing in foreign exchange, namely acquisition, borrowing, transfer, lending or exchange of foreign exchange otherwise than through an authorised dealer. On the admitted facts, the appellant received only a cheque payable in Indian currency, and not any amount payable in foreign currency or any instrument answering the statutory description of foreign exchange. The Explanation to Section 8(1) was held inapplicable because there was no allegation that foreign exchange had been deposited with the appellant or that an account in foreign exchange had been opened with him. Section 8(2) was also held inapplicable since that provision is attracted only where a transaction provides for conversion of Indian currency into foreign currency or vice versa at a rate other than that authorised by the Reserve Bank, and there was neither any such allegation nor any finding on unauthorised exchange rate conversion. [Paras 16, 17, 18, 19, 23] The penalty could not be sustained, as the facts alleged did not disclose any violation of Section 8(1) or Section 8(2) of FERA. Suppression of material order - prima facie order in criminal proceedings - HELD THAT:- The Court held that the earlier order passed in the criminal revision petition was confined to the limited question whether there was sufficient material to proceed with the criminal prosecution on a prima facie view. Since the criminal case had thereafter ended in acquittal, that order had ceased to have material relevance for deciding the present appeal on the legality of the penalty. Its non-filing, therefore, could not justify rejection of the appeal on the ground of concealment. [Paras 20, 21, 22] The objection founded on alleged suppression was rejected. Final Conclusion: The Court held that receipt of Indian currency through a cheque drawn on an NRE account, without any dealing in foreign exchange or any unauthorised currency conversion, did not attract Section 8(1) or Section 8(2) of FERA. The Tribunal's order was set aside, the appeal was allowed, and refund of the deposited penalty was directed.

2026 (4) TMI 699 - DELHI HIGH COURTFEMA

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Issues: (i) Whether contravention of Regulation 5(1)(iv) of the Foreign Exchange Management (Deposit) Regulations, 2000 could sustain penalty against the account holders, notwithstanding that the provision also regulated the authorised dealer and had been omitted later; (ii) Whether confiscation of the amounts lying in the NRNR accounts could be sustained without recorded reasons.

Issue (i): Whether contravention of Regulation 5(1)(iv) of the Foreign Exchange Management (Deposit) Regulations, 2000 could sustain penalty against the account holders, notwithstanding that the provision also regulated the authorised dealer and had been omitted later.

Analysis: Regulation 5(1)(iv), read with Schedule 4, permitted NRNR accounts to be opened only by persons resident outside India and out of funds remitted from outside India through normal banking channels. The obligation was not confined to the authorised dealer alone; the account holder was also bound by the regulatory scheme. Contravention therefore attracted liability under Section 13(1) of the Foreign Exchange Management Act, 1999. The later omission of Regulation 5(1)(iv) did not erase prior violations or prevent proceedings in respect of conduct committed when the regulation was in force. The effect of omission was only prospective and did not nullify accrued liability.

Conclusion: The challenge to the penalty failed. The penalty against the assessees was sustained.

Issue (ii): Whether confiscation of the amounts lying in the NRNR accounts could be sustained without recorded reasons.

Analysis: Confiscation under Section 13(2) of the Foreign Exchange Management Act, 1999 is discretionary and quasi-judicial in nature. The authority must record reasons showing why penalty alone is insufficient and why confiscation is warranted on the facts. Here, neither the Adjudicating Authority nor the Appellate Tribunal gave reasons for confiscating the amounts in the accounts, and the record showed that the loan transaction had been repaid through maturity proceeds with no loss of foreign exchange. A non-speaking confiscatory order could not stand. In view of the long lapse of time, remand was declined.

Conclusion: The confiscation directions were set aside.

Final Conclusion: The regulatory violation and consequent penalty were upheld, but the confiscation of the amounts in the NRNR accounts was annulled for want of reasons.

Ratio Decidendi: A provision omitted from a fiscal or regulatory regime does not obliterate liability incurred for its breach while it was in force, and discretionary confiscation affecting property must rest on recorded reasons demonstrating why penalty alone is inadequate.

Omission of a foreign exchange regulation did not erase past liability, but confiscation required recorded reasons.
Contravention of Regulation 5(1)(iv) of the Foreign Exchange Management (Deposit) Regulations, 2000 sustained penalty against NRNR account holders because the regulatory obligation applied to the account holders as well as the authorised dealer, and later omission of the provision did not extinguish liability for prior breaches. The penalty was therefore upheld under FEMA. Confiscation of the amounts in the accounts, however, was set aside because the authority exercised a discretionary power without recorded reasons showing why penalty alone was inadequate; the non-speaking confiscatory order could not stand, and remand was declined after the lapse of time.

Imposition of Penalty for contravention of the NRNR account scheme - Effect of omission of subordinate legislation on prior contraventions - confiscation of the amounts standing to the credit of the NRNR accounts - Reasoned order - Non-speaking order. NRNR account contravention - Account holder liability - HELD THAT: - The Court held that Regulation 5(1)(iv) read with Schedule 4 did not cast an obligation exclusively on the authorised dealer. While the authorised dealer is permitted to accept deposits under the scheme, the account itself can be opened only by a person resident outside India and only from funds remitted from outside India. The regulatory requirement therefore operates both upon the bank and upon the person owning the account. Since Section 13(1) of FEMA applies where any person contravenes the Act, rules or regulations, the account holders were also liable to penalty for opening subsequent NRNR accounts out of loan funds raised within India. [Paras 19, 20] The challenge to the penalty on the ground that only the authorised dealer could be proceeded against was rejected. Omission as repeal - Saving of prior liability - HELD THAT:- Relying on the principles explained in Fibre Boards Private Limited, Bangalore v. Commissioner of Income Tax, Bangalore [2015 (8) TMI 482 - SUPREME COURT] and Shree Bhagwati Steel Rolling Mills v. Commissioner of Central Excise & Anr. [2015 (11) TMI 1172 - SUPREME COURT] the Court held that repeal includes repeal by express omission and that such omission does not obliterate liabilities already incurred, unless a contrary intention appears. The amendment deleting Regulation 5(1)(iv) merely stopped fresh acceptance or renewal of NRNR deposits and provided for continuance of existing deposits till maturity with credit of maturity proceeds to NRE accounts thereafter. It did not wipe out prior violations or the consequences flowing from them. Rayala Corporation (P) Ltd. & Anr. v. Director of Enforcement, New Delhi [1969 (7) TMI 109 - SUPREME COURT] was held inapplicable to the facts. [Paras 23, 24, 25, 26] The contention that the show cause notices were not maintainable because the regulation had been omitted was rejected. Confiscation under FEMA - Requirement of reasons - HELD THAT:- The Court held that the power under Section 13(2) of FEMA is discretionary, as confiscation may be directed only if the adjudicating authority thinks fit. Since the authority acts in a quasi-judicial capacity, it must record reasons for deciding that, in addition to penalty, confiscation is warranted. Neither the adjudicating authority nor the appellate tribunal gave any reasons for ordering confiscation. The record also showed that the loan transactions stood repaid through the maturity amounts of the NRNR accounts, and the relevant circumstances were not considered. In view of the non-speaking nature of the confiscation direction and the lapse of time, the Court declined remand and held that there was no warrant for confiscation on the facts. [Paras 28, 29, 30, 31] The confiscation orders were set aside, while the penalty orders were left undisturbed. Final Conclusion: The appeals were partly allowed. The Court upheld the penalty imposed for contravention of the FEMA deposit regulations, rejected the challenge based on omission of the relevant regulation, but set aside the confiscation of the amounts lying in the appellants' NRNR accounts for want of reasons and for absence of justification on the facts.

2026 (3) TMI 1644 - DELHI HIGH COURTFEMA

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Pre-deposit relief under FEMA penalty challenge: Tribunal discretion upheld, but deposit condition further reduced in the interests of justice.
The second proviso to Section 19 allows dispensation of penalty pre-deposit only where undue hardship is shown, subject to conditions the Appellate Tribunal considers fit. Here, the Tribunal had already exercised that discretion by reducing the deposit requirement to 10% of the penalty, and the challenge to the petitioners' prima facie case did not justify interference under the narrow scope of Article 227. The High Court found no infirmity in the Tribunal's approach, but further modified the pre-deposit condition in the interests of justice by reducing it to 5% of the penalty, with the balance to be secured by bank guarantee or surety to the Tribunal's satisfaction.

Waiver of pre-deposit - Undue hardship - Supervisory jurisdiction under Article 227Waiver of pre-deposit - Undue hardship - Prima facie case - Supervisory jurisdiction under Article 227 - The challenge to the Appellate Tribunal's order granting only partial waiver of pre-deposit under Section 19 of FEMA was decided by examining whether the condition requiring deposit could be interfered with in supervisory jurisdiction. - HELD THAT: - The Court held that under Section 19 of FEMA, deposit of the penalty is the rule, and dispensation is an exception exercisable in a particular case on satisfaction of undue hardship, subject to conditions considered fit to safeguard recovery. The Appellate Tribunal had already exercised that statutory discretion by granting substantial waiver and directing deposit of only a part of the penalty. On the petitioners' plea of a strong prima facie case, the Court noted that, on their own statements, they were aware that the amounts were to be remitted abroad and the relevant FEMA provisions could therefore stand attracted; hence, no clear prima facie case for total waiver was made out. On hardship, the Court found no material to show that the Tribunal's order suffered from perversity, unreasonableness or non-application of mind. It further held that, in proceedings under Article 227, the High Court does not act as an appellate forum to reappreciate the specialised tribunal's assessment. The decisions in Nimesh Suchde vs. Union of India (UOI) and Ors. and Priya Shah vs. Enforcement Directorate were held inapplicable on facts, since those cases did not concern a comparable exercise of discretion where substantial waiver had already been granted. [Paras 13, 14, 15, 16, 17]No infirmity was found in the Tribunal's exercise of discretion; however, in the interest of justice, the condition was modified by reducing the cash pre-deposit from 10% to 5%, with the balance 5% to be secured by bank guarantee or surety to the satisfaction of the Appellate Tribunal.Final Conclusion: The petitions were disposed of by upholding the Tribunal's order in principle and declining interference on merits under Article 227. The only modification made was to reduce the immediate pre-deposit requirement to 5% and permit the remaining 5% to be secured by bank guarantee or surety, leaving the merits of the penalty appeals open before the Appellate Tribunal.

2026 (3) TMI 988 - DELHI HIGH COURTFEMA

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Unreasonable delay in issuing show cause notices can invalidate proceedings where record-preservation duties had expired.
Show cause notices alleging contraventions from 1989 to 1995 were held liable to be quashed for unreasonable delay, as several notices were issued only in 2002. The court compared the notice dates with the transaction period and relied on the Banking Companies (Period of Preservation of Records) Rules, 1985, noting that records were to be preserved for five or eight years unless extended by written direction. As no written extension was shown, the reasonable period test was applied and the delayed notices and proceedings were quashed, with the appellate orders set aside and bank guarantees directed to be discharged and released.

2026 (2) TMI 1111 - DELHI HIGH COURTFEMA

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Issues: (i) Whether a foreign decree passed by a superior court of a reciprocating territory was executable in India under Section 44A of the Code of Civil Procedure, 1908. (ii) Whether the decree was unenforceable on the ground that the monetary awards for early redemption amount, interest and damages violated FEMA and RBI directions, attracting the exceptions in Section 13(c) and Section 13(f) of the Code of Civil Procedure, 1908.

Issue (i): Whether a foreign decree passed by a superior court of a reciprocating territory was executable in India under Section 44A of the Code of Civil Procedure, 1908.

Analysis: The United Kingdom was treated as a reciprocating territory and the English court as a superior court for the purpose of Section 44A. The decree was final under English law and fell within the statutory mechanism for execution of decrees of reciprocating foreign courts. The objections did not displace the statutory basis for execution.

Conclusion: The foreign decree was held executable under Section 44A of the Code of Civil Procedure, 1908.

Issue (ii): Whether the decree was unenforceable on the ground that the monetary awards for early redemption amount, interest and damages violated FEMA and RBI directions, attracting the exceptions in Section 13(c) and Section 13(f) of the Code of Civil Procedure, 1908.

Analysis: The Court held that the alleged FEMA breach did not make the foreign decree unenforceable. The RBI's stand clarified that payment of the early redemption amount and related sums could be remitted subject to the extant framework, and that damages for breach of contract were not controlled by the ECB ceiling in the manner contended by the judgment debtor. The award of interest at 7.95% was also found to remain within the contractual and regulatory cap. The objections based on absence of a registered account were rejected after RBI clarified that remittance to the disclosed Euro account was not barred.

Conclusion: The decree was not hit by the exceptions in Section 13(c) or Section 13(f) of the Code of Civil Procedure, 1908, and the FEMA objections were rejected.

Final Conclusion: The execution petition succeeded, the foreign decree was ordered to be enforced, the objections were dismissed with costs, and the decretal amounts were directed to be remitted to the specified account.

Ratio Decidendi: A foreign decree of a reciprocating superior court remains executable in India unless it squarely falls within Section 13 of the Code of Civil Procedure, 1908, and alleged FEMA or RBI guideline violations do not by themselves defeat execution where the awarded sums are legally remittable and the decree is otherwise valid.

Foreign decree execution upheld where FEMA and RBI objections did not bar enforcement of remittable contractual awards.
A foreign decree of a superior court in a reciprocating territory was executable in India under Section 44A of the Code of Civil Procedure because the United Kingdom was treated as a reciprocating territory and the decree was final under English law. The decree was also not barred by the exceptions in Section 13(c) or Section 13(f): alleged FEMA and RBI violations did not by themselves defeat enforcement where the early redemption amount, interest and damages were held remittable within the applicable framework, and the 7.95% interest rate was found consistent with the contractual and regulatory cap. The execution petition succeeded and the objections were dismissed with costs.

Execution of foreign judgment u/s 44A of the Code of Civil Procedure - exceptions to enforcement under Section 13(c) and 13(f) of the Code of Civil Procedure - applicability of FEMA and Reserve Bank of India directions to enforcement of foreign decrees - Master Direction on External Commercial Borrowings - all-in-cost ceiling and other costs cap - damages for breach of contract awarded by a foreign court are not subject to FEMA/RBI ceilings - remittance in satisfaction of a foreign decree to a non-resident's bank account - reciprocating territory and recognition of foreign superior court decrees - preclusion of new substantive objections not raised before the foreign court - post-facto RBI permission and regulatory compliance - ratio: foreign court's award of damages and interest does not become unenforceable in India merely because of alleged FEMA/RBI non-compliance - HELD THAT:- It is an undisputed fact that the United Kingdom is a ‘reciprocating territory’ as per Section 44A of the CPC. It is also not in dispute that in the present case, the judgment/decree has been passed by the High Court of Justice Business & Property Courts of England & Wales Commercial Court, Queen’s Bench Division, which would be a ‘Superior Court’ of a ‘reciprocating territory’. It may be noted that the issue of violation of FEMA was never raised by Prakash Industries before the English Court. Therefore, there was no occasion for the English Court to give a finding on the said issue. A foreign court cannot be expected to take cognizance of an Indian statute, unless it has been pointed out by a contesting party. This is not a case of an ex-parte decree as Prakash Industries was duly contesting the case before the English Court. Since it is an undisputed fact that the RBI has approved the Subscription Agreement, along with the coupon rate of 5.95% mentioned therein, it has to be presumed that the interest rate was in terms of the limits provided in paragraph 2.1(vi) of the Master Direction-ECB. The damages were awarded by the English Court on account of breach committed by Prakash Industries of its contractual obligations i.e. failure to convert the FCCBs into equity in a timely manner as was agreed in the Subscription Agreement. The English Court has also awarded interest on the aforesaid amount of damages, which was squarely within its jurisdiction. In my considered view, the amounts awarded by a competent Court, whether Indian or foreign, towards damages for breach of contract, cannot be subject to ceilings prescribed under FEMA and/or RBI directions/circulars. In Alcon Electronics [2016 (12) TMI 1826 - SUPREME COURT], the Supreme Court had rejected the objection raised by the judgment debtor that since costs imposed by the Foreign Court were not in terms of Section 35A of the CPC, the decree passed by the foreign Court is unenforceable. The Supreme Court held that Indian courts can execute a foreign decree for interest on costs, which are permissible under the UK law. Taking note of the contradiction in the stand taken by the RBI, this Court vide order dated 8th September, 2025 had directed RBI to file an affidavit. Even in the subsequent affidavit filed by RBI on 18th November, 2025, same stand was maintained. It is manifest from reading of the judgment in NTT Docomo (supra) that damages for breach of contract, such as those awarded by the English Court in the present case, cannot be subjected to FEMA Regulations or RBI guidelines. The RBI in NTT Docomo [2017 (5) TMI 492 - DELHI HIGH COURT] had raised an objection that permission from the RBI is required for transmission of amount awarded as damages by the Arbitral Tribunal. However, the Court held that in respect of damages awarded by an Arbitral Tribunal, no general or special permission from the RBI would be required. The Court while declining RBI’s request for intervention in the enforcement proceedings, held that FEMA and RBI directions/circulars could not be invoked to obstruct or dilute the enforcement of a foreign award. Even though NTT Docomo (supra) pertains to a foreign arbitral award, the aforesaid findings would equally be applicable in cases where a decree awarding damages has been passed by a foreign court. The ERA has been granted by the English Court in terms of Clause 10.1 and Clause 11.1 of the Subscription Agreement which provided for acceleration of the bonds in the event of default, which occurred in the present case due to non-payment of coupon interest by Prakash Industries. Clearly, there is no bar under any of the FEMA regulations or the Master Direction-ECB in respect of such early redemption. Interest - The Subscription Agreement provided for interest at the rate of 5.95% on the FCCBs and an additional default interest of 2% per annum. The interest awarded by the English Court on the ERA at the rate of 7.95%, clearly falls within the cap of 2% provided under paragraph 2.1 (vii) of the Master Direction-ECB. Therefore, there is no merit in the objection taken on behalf of Prakash Industries that the interest has been awarded by the English Court over and above what is stipulated in the Master Direction-ECB. Thus, it is held that the decree passed by the English Court is executable under Section 44A of the CPC. The said Decree does not fall under the exceptions provided under Section 13(c) and 13(f) of the CPC. The objections raised on behalf of the Prakash Industries are completely devoid of merits and have been filed solely to cause obstruction and to cause delay in the execution of the Foreign Decree. Consequently, the same are rejected with costs of Rs. 1,00,000 payable to the decree holder/Peter Beck. Thus, Prakash Industries is liable to remit the decretal amount in favour of Peter Beck along with costs. All pending applications stand disposed of.

2026 (3) TMI 1377 - CALCUTTA HIGH COURTFEMA

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Monetary threshold and absence of substantial question of law led to dismissal of the income-tax appeal.
An income-tax appeal was found to fall below the monetary threshold prescribed by the governing circular, so it was not entertained on merits. The Court also held that the Tribunal's order did not raise any substantial question of law warranting interference. On that basis, the appeal was dismissed.

2026 (2) TMI 1104 - BOMBAY HIGH COURTFEMA

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Issues: (i) whether the foreign arbitral award, once held enforceable, could be executed by the executing court despite objections based on FEMA, RBI approval, valuation, and alleged distinction between enforceability and executability; (ii) whether the executing court could grant consequential reliefs including transfer of shares, appointment of nominee directors, injunctions, partial execution against remaining respondents, and set-off of costs.

Issue (i): Whether the foreign arbitral award, once held enforceable, could be executed by the executing court despite objections based on FEMA, RBI approval, valuation, and alleged distinction between enforceability and executability?

Analysis: A foreign award that has been found enforceable under the Arbitration and Conciliation Act, 1996 is to be treated as a decree and may be executed in the same proceeding. The distinction sought to be drawn between enforceability and executability was rejected. The executing court cannot reopen objections that were already rejected in enforcement proceedings, especially where the Supreme Court has held that FEMA violations, if any, do not render the award void and that post-facto RBI permission may be available. The objections on valuation and pricing guidelines were also held to be matters already concluded and incapable of being re-agitated in execution.

Conclusion: The objections to executability were rejected, and the award was held executable.

Issue (ii): Whether the executing court could grant consequential reliefs including transfer of shares, appointment of nominee directors, injunctions, partial execution against remaining respondents, and set-off of costs?

Analysis: The residual power under the Code of Civil Procedure, 1908 permits the court to adopt execution machinery necessary to give effect to the relief granted by the award. The reliefs directing transfer of shares and steps necessary for implementation were treated as severable and capable of partial execution against the remaining respondents after deletion of some parties. The court also held that the directions for appointment of nominee directors and interim injunctions were consequential to the award and within execution powers. The request to rely on RBI correspondence to postpone execution was rejected, and the set-off of arbitral costs against the transfer price was allowed.

Conclusion: The consequential reliefs were granted, including transfer of shares, appointment of nominee directors, injunctions, partial execution, and set-off.

Final Conclusion: The execution application succeeded in substance, with the award enforced and the connected interim and ancillary reliefs granted to facilitate implementation of the award.

Ratio Decidendi: Once a foreign arbitral award is held enforceable and deemed a decree, the executing court must give effect to it in execution and cannot reopen merits-based objections already rejected in enforcement proceedings, unless the decree is a nullity on the face of the record; consequential and severable reliefs necessary to implement the award may also be granted in execution.

Enforceable foreign arbitral awards may be executed as decrees, with consequential reliefs granted to implement the award.
A foreign arbitral award held enforceable under the Arbitration and Conciliation Act, 1996 is to be treated as a decree and executed in the same proceeding; objections based on FEMA, RBI approval, valuation, pricing guidelines, and any asserted distinction between enforceability and executability cannot be reopened in execution once rejected in enforcement proceedings. The court may also use execution machinery to grant consequential and severable reliefs necessary to implement the award, including transfer of shares, appointment of nominee directors, injunctions, partial execution against remaining respondents, and set-off of arbitral costs.

Enforceability and executability of foreign arbitral awards - Deeming of foreign award as decree u/s 49 - Limited scope of challenge u/s 48 - Executing court cannot go behind a decree except where the decree is a nullity - Compliance with FEMA and NDI Rules and pricing guidelines as rectifiable, not rendering award void; RBI's power to condone or direct - Residuary execution powers u/s 51(e) of the Code of Civil Procedure, 1908 for giving effect to decrees - Partial execution and severability of reliefs in a decree for specific performance - Preclusion of re-agitation of issues previously decided by the Supreme Court in enforcement proceedings - HELD THAT:- Taking this Court to Part II of the Arbitration Act, which deals with enforcement of certain foreign awards, and to the definition of a foreign award in Section 44 of the Arbitration Act and to Section 46 of the Arbitration Act which provides as to when a foreign award is binding, Dr Saraf has submitted that any foreign award which would be enforceable under this chapter shall be treated as binding for all purposes on the persons as between whom it was made and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India. The Respondents’ have sought to resist the execution of the Awards primarily on the ground that the executability of an award differs from the enforceability of the award and that they are two different and distinct stages and that the executing Court cannot execute a decree, the implementation of which is either illegal or impossible. That there exists a dichotomy between the executability of an award on one hand and enforceability of the award on the other, and that there is material difference in the scope of enquiry and the powers of the Court in a proceeding for enforcement of a foreign award under Section 48 of the Arbitration Act and the execution of an award as a decree of the Court after the Court is satisfied. Also the ground that the transfer of shares would be contrary to the FEMA and the Foreign Exchange Management (Non-debt Instrument) Rules, 2016 (NDI Rules) including on the valuation for the transfer of shares has been raised. Enforcement v/s executability of the Award - HELD THAT:- As can be seen the words enforcement and execution, bear the same meaning and are often used interchangeably. In the context of arbitral awards, once an award is held to be enforceable, it necessarily becomes executable, as enforceability under law implies that the award can be acted upon in the manner as a decree of a civil court. Thus while all execution proceedings fall under the umbrella of enforcement, a determination that an award is enforceable legally entitles the award-holder to initiate execution. If the Court is satisfied that the application under Section 48 is without merit, and the foreign award is found to be enforceable, then under limited purpose of the legal fiction is for the purpose of the enforcement of the foreign award. The High Court concerned would then enforce the award by taking recourse to the provisions of Order XXI of the CPC. Therefore, what the law requires is the satisfaction of the Court that the foreign award is enforceable and once that is done there is no necessity for the Executing Court to delve into the very same question once again. To give a restricted and therefore contrived meaning to the word ‘enforcement’ would lead to an absurd situation where a foreign award creditor would have to face an additional hurdle in the form of objections as to executability of a foreign award alien to the grounds enumerated in Section 48 of the Arbitration Act even after the award has been held to be enforceable. It is trite law that the executing court cannot go behind a decree or an award which is held to be executable and it is only where the award/decree sought to be enforced is on the face of the record, wholly without jurisdiction and thus a nullity, that an executing court will interfere with the execution of an award/decree. And that admittedly is not the case here. As can be seen that the Hon’ble Supreme Court has categorically held that unlike Section 47 of the Foreign Exchange Regulation Act, 1973 (“FERA”) transactions that violate FEMA cannot be held to be void. That even if RBI were to take action under FEMA, the non-enforcement of a foreign award on the ground of violation of a FEMA Regulation or Rule would not arise as the award does not become void on that count. That a rectifiable breach under FEMA can never be held to be a violation of the fundamental policy of Indian Law. That if a particular act violates any provision of FEMA or the Rules framed thereunder, permission of RBI may be obtained post facto if such violation can be condoned. As can be seen, Section 3 of the FEMA inter-alia provides that no person can deal in or transfer foreign exchange/foreign security to a person not being an authorised person or make payment to or for the credit of any person resident outside India, “Save as otherwise provided in this Act, rules or regulations made thereunder, or with the general or special permission of the Reserve Bank, no person shall..” Section 3 of the FEMA, by itself does not impose any requirement of prior approval or prior permission. The term “general or special permission” includes within its ambit, both prior permission as well as subsequent permission. In the facts of this case, in fact the transaction being a current account transaction, is already contemplated in the general permission that have been granted by the Reserve Bank of India only subject to the pricing / valuation being certified by a Chartered Accountant, which in the facts of this case is done by the Deloitte Report and which has already been looked into and approved by the Hon'ble Supreme Court and therefore the same issue cannot be re-agitated before this Court. The question therefore of prior approval from Reserve Bank of India does not arise. The Respondents have sought to rely upon the decision of Cruz City Mauritius Holdings [2017 (4) TMI 729 - DELHI HIGH COURT] to contend that the prior approval of the RBI is necessary, the Respondents’ reliance is misplaced in as much as in the facts in the said decision pertain to the remittance of foreign exchange in favour of a foreign party seeking enforcement of a foreign exchange in favour of the Indian Party. Thus, the contention of the Respondents that the Awards are in contravention of FEMA having been previously raised and decided before the Hon’ble Supreme Court cannot be raised again in execution. Apart from the fact that the issue has already been concluded by the decision of the Hon'ble Supreme Court and cannot be re-agitated before this Court, it is settled law that valuation relating to the date of the passing of the awards in the year 2014 would be relevant and not the current or recent valuation or the date when the Hon'ble Supreme Court passed the order negativing the challenges to the enforcement of the award or the date of the judgment holding the awards to be executable in view of the decision of the Hon'ble Supreme Court holding the award to be enforceable. The decision of the Hon'ble Supreme Court in the case of Forasol [1983 (10) TMI 234 - SUPREME COURT] as sought to be relied upon by Mr. Nankani, therefore, would not be applicable to the facts of this case. The Respondents’ attempt to raise the above and other objections in the current execution mirrors those previously addressed during the enforcement phase of the arbitral award. Such repetitive objections are impermissible, as they contravene the pro-enforcement bias of the New York Convention adopted by Section 48 of the Arbitration Act. Allowing the respondents to reintroduce these objections at this juncture would effectively grant them a ‘second bite at the cherry’ undermining the finality of the arbitral award and the efficiency of the execution process and therefore these objections stand rejected. Section 98 of the Companies Act, 1956, contemplates the NCLT directing convening of a meeting of a company whereas the prayers sought for in Interim Application No. 1401 of 2021 are qua the Respondents in enforcement of the contractual rights confirmed by the award not falling within the purview of Section 98 and that the reliefs sought do not fall within the exclusive jurisdiction of the NCLT. That, this Court being an executing Court can exercise powers under Section 51(e) of the CPC, as has been upheld by the Hon'ble Supreme Court in the case of State of Haryana [2004 (6) TMI 619 - SUPREME COURT] which allows this Court to pass orders for enforcement of decrees in a manner to give effect to it. Further, the decision in the case of Cheran Properties Ltd. vs. Kasturi & Sons [2018 (4) TMI 1412 - SUPREME COURT] is distinguishable and therefore not applicable and would not apply to the facts of this case as the said decision was on an application for rectification whereas the present case pertains to execution of a foreign award which declares the Applicant’s rights to have the shares held by the Respondents in the Company transferred to it. It is in furtherance of these rights that the Respondents have been directed to convene and hold a meeting of the board of directors of the company for the limited purpose of registering the transfer of shares in favour of the Applicants, whereas the award in the case of Cheran Properties Ltd. vs. Kasturi & Sons contains no such direction / order. There is no rectification of the register of members sought in the facts of this case. The residuary power under Section 51(e) of the CPC permits execution as far as machinery under CPC can actually operate, it does not create new substantive jurisdiction, it only covers cases where the machinery under CPC is adaptable. The injunctive reliefs in furtherance of the Awards and transfer of shares and direction to the Respondents to take all necessary steps and to execute all necessary documents for the appointment of the Applicant’s nominee directors on the Board of Directors of Ravin Cables Ltd are within the powers of the executing Court. As can be seen, the RBI letter does not bear out any new circumstance necessitating a renewed deliberation on issues already argued and dealt with. The RBI letter in fact records that the RBI has no objection to the enforcement of the arbitration award upheld by the Hon’ble Supreme Court. The said letter does not convey that prior permission of the RBI is required for the execution of the award. Infact, as noted above, paragraph 88 of the decision of the Hon'ble Supreme Court in the case of Vijay Karia and Others [2020 (2) TMI 628 - SUPREME COURT] has considered and negatived this objection which cannot be gone into again, and that, no objection as to the FEMA 1999, Rules, Regulations nor the pricing guidelines can be raised again. The objection sought to be raised by way of a fresh letter dated 19th August 2025 post the filing of the Execution Application, in my view, would therefore not be of any relevance but only to delay the execution proceedings, inviting an order for payment of costs. As noted, on 9th September 2025 and on 11th November 2025, this Court has permitted deletion of the Respondents no.70, 71, 72, 74, 75 and 78 at the request of the Applicant. It is pertinent to note that no objection was raised then nor the order permitting the deletion has been challenged. But only subsequently an objection has been raised on behalf of the Respondents that the award cannot be executed partially as the award contemplates transfer of all shares. Apart from the fact that no objection was raised when the deletion was allowed, I am of the view that although the award contemplates transfer of all shares held by multiple shareholders, and the same refers to entitlement inter se the contracting parties the same is not necessarily a joint, inseparable obligation requiring simultaneous performance. The said relief is several and the award does not expressly stipulate that the transaction is indivisible or conditional upon collective performance. It is trite law that partial execution of a decree that grants separate reliefs is permissible. In the case of Panaji Girdharlal v. Ratanchand Hajarimal Marwadi [1933 (2) TMI 19 - BOMBAY HIGH COURT] this Court held that where the decree sought to be executed gives two different reliefs, the decree may be executed separately and the Applicant will have waived his right to execution for the reliefs he chooses not to press. Accordingly, the relief of transfer of shares is severable and distinct and the Applicant is entitled to pursue the execution against those Respondents whose share transfer obligations are sought to be enforced. All the objections against the Final Arbitral Award raised by the Respondents are hereby rejected and the Final Arbitral Award is held to be executable and the Execution Application is held to be maintainable. The execution to proceed as per law. It is clear that the stand taken by the Respondents is contrary to the opinion of the Hon'ble Supreme Court in enforcement proceedings viz. in the case of Prysmian Cavi E Sistemi SRL vs. Vijay Karia and Another and despite that, the Respondents have raised the very same issues only to delay the fruits of the award in favour of the Execution Applicant, by not only re-agitating the grounds already decided and negatived by the Hon'ble Supreme Court but also endeavoured to raise a fresh issue in the garb of a fresh letter from the Reserve Bank of India which cannot be permitted but has to be deprecated by imposition of costs to be paid to the Applicant, particularly when there is no challenge to the award under the English law. The Final Award, already held enforceable by the Supreme Court, is executable.

2026 (2) TMI 401 - CALCUTTA HIGH COURTFEMA

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Issue-specific statutory bar ruling preserves trial on remaining contract and validity questions
The decision on the additional issue under the Foreign Exchange Regulation Act, 1973 was confined to that issue alone and did not prejudice determination of the remaining issues in the suit. Because the additional issue overlapped only limitedly with one original issue, the court clarified that no wider preclusive effect could attach to the earlier finding. The enforceability and validity of the agreement, together with the other statutory objections and original issues, remained open for trial and were to be decided independently on their own merits.

2026 (1) TMI 861 - CALCUTTA HIGH COURTFEMA

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Waiver of pre-deposit under Section 19(1) FEMA: Tribunal must allow alternative securities when indigence makes cash deposit impossible
When a tribunal finds undue hardship and poor financial condition, treating a statutory 10% ceiling as a mandatory minimum deposit renders the appellate remedy illusory; for an NPA-classified entity with no liquid assets, a multi-million cash deposit is prima facie undue hardship and alternative conditions permitted under the second proviso to Section 19(1) including indemnity bonds or corporate guarantees may be imposed to secure the States interest without depriving the appellant of effective access to appeal; the substantial question is answered in the appellants favour.

Jurisdictional error - Undue hardship - Impossibilium Nulla Obligatio Est - waiver of pre-deposit under the Second Proviso to Section 19(1) - contravention of Sections 7 and 8 - Non-Performing Assets (NPA) - fundamental equilibrium between the State’s prerogative to secure revenue and the citizen’s right to an effective appellate remedy - Whether the Appellate Tribunal, after having factually arrived at a finding of 'undue hardship' and 'poor financial condition,' committed a jurisdictional error by treating the 10% limit in the Third Proviso to Section 19(1) of FEMA as a mandatory minimum deposit, thereby rendering the statutory right of appeal illusory and the order perverse? HELD THAT:- The expression “undue hardship” is not merely “hardship,” but a burden “out of proportion to the nature of the requirement itself”. For an NPA declared entity with no liquid assets, a multi-million-rupee deposit is, prima facie, an undue hardship. As the Hon’ble Supreme Court cautioned in Monotosh Saha vs. Special Director, ED [2008 (8) TMI 9 - SUPREME COURT], the Tribunal must ensure that the remedy of appeal is not rendered “illusory.” If a condition for appeal is impossible to fulfil, the right to appeal is effectively snatched away. By acknowledging “poor financial condition” while simultaneously demanding Rs.2.20 Crore from an NPA-classified entity, the Tribunal “took away with the left hand what it gave with the right.” By treating the 10% ceiling as a mandatory minimum despite a finding of hardship, the Tribunal failed to exercise its jurisdiction meaningfully. We are of the firm opinion that when a Tribunal finds an appellant is indigent, it must explore the “Middle Path.” Safeguarding Revenue does not always necessitate a liquid cash deposit. The Second Proviso allows the Tribunal to impose “such conditions as it may deem fit,” which includes alternative securities like Indemnity Bonds or Corporate Guarantees. These mechanisms secure the interest of the State without choking the Appellant's access to justice. Thus, we find that the substantial question of law is answered in the affirmative, in favor of the appellant.

2026 (1) TMI 793 - CALCUTTA HIGH COURTFEMA

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10% pre-deposit u/s19(1) challenged as rendering appeal illusory when going-concern at stake; appeals allowed, threshold modified
Whether dismissal for non-compliance with the 10% pre-deposit under s.19(1) violated the undue hardship doctrine: HC held that the Tribunal failed to balance the statutory pre-deposit mandate with the undue hardship principle; where a party alleges that its existence as a going concern is at stake, the Tribunal must assess whether the pre-deposit requirement renders the statutory right of appeal illusory. While recognizing the proviso's object of safeguarding realization of penalty, the Court found that dismissal on technicalities without hearing merits offends natural justice. Outcome: the appeals were allowed (disposed of) and the pre-deposit threshold was directed to be suitably modified to avert injustice.

2026 (1) TMI 2 - BOMBAY HIGH COURTFEMA

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Issues: (i) whether the petition for enforcement of the foreign awards was barred by limitation and whether the earlier limitation order operated as res judicata; (ii) whether enforcement of the foreign awards could be refused as being contrary to the public policy of India; (iii) whether the appeal was maintainable against the 2nd, 3rd and 4th respondents; and (iv) whether the 2nd, 3rd and 4th respondents could be impleaded and whether execution could be levied against them.

Issue (i): whether the petition for enforcement of the foreign awards was barred by limitation and whether the earlier limitation order operated as res judicata.

Analysis: The earlier order on limitation had attained finality after dismissal of the challenge before the Supreme Court. The limitation question was directly and substantially in issue in the earlier stage of the same proceedings. The finding that the petition was within time was not a mere incidental observation but a reasoned determination based on law and facts. Subsequent overruling of certain legal propositions in other cases did not convert that inter partes decision into a nullity. The limitation ruling also involved a mixed question of law and fact, not a pure jurisdictional question of the kind that would exclude res judicata.

Conclusion: The limitation objection was rejected. The petition was held to be within limitation and the earlier decision operated as res judicata.

Issue (ii): whether enforcement of the foreign awards could be refused as being contrary to the public policy of India.

Analysis: The public policy defence under Section 48 had to be construed narrowly. A mere alleged breach of FEMA, or alleged non-consideration of belated expert evidence, did not justify refusal of enforcement where the underlying transaction had been restructured and the arbitral findings could not be re-opened on merits. The record did not show a prohibition rendering the agreement void in the manner contemplated by the authorities relied on by the respondents. The objections relied upon were, in substance, attempts at a merit-based review, which is impermissible in enforcement proceedings for foreign awards.

Conclusion: Enforcement could not be refused on public policy grounds. The objection was rejected.

Issue (iii): whether the appeal was maintainable against the 2nd, 3rd and 4th respondents.

Analysis: A composite petition seeking recognition, enforcement and execution of a foreign award is maintainable. An appeal under Section 50 cannot be read in a truncated manner so as to permit challenge to refusal of enforcement but deny challenge to the consequential refusal to execute the award. Such a reading would fragment a single composite adjudication and undermine the statutory pro-enforcement scheme.

Conclusion: The appeal was held maintainable against all the respondents.

Issue (iv): whether the 2nd, 3rd and 4th respondents could be impleaded and whether execution could be levied against them.

Analysis: The diversion of the award debtor's assets to associated companies during the arbitral process, while control remained with the same corporate group, justified lifting the corporate veil to the limited extent necessary to protect execution. The 2nd and 3rd respondents could therefore be proceeded against only in relation to the award debtor's assets diverted to them. The 4th respondent could be impleaded as a proper party on the facts, but no asset of the award debtor had been shown to have been diverted to it, so no execution could lie against it or its assets.

Conclusion: The impleadment was upheld. Execution was permitted against the award debtor and against the diverted assets in the hands of the 2nd and 3rd respondents, but not against the 4th respondent independently.

Final Conclusion: The impugned decision was modified. The foreign awards were held enforceable, the limitation and public policy objections failed, the appeal was maintainable against all respondents, and execution was permitted only to the extent of the award debtor's assets diverted to the 2nd and 3rd respondents.

Ratio Decidendi: A final inter partes determination on limitation in the same proceedings binds the parties at later stages by res judicata, and in enforcement of foreign awards, the public policy defence cannot be used to reopen the merits or to defeat execution through corporate restructuring that merely places the award debtor's assets beyond reach.

Foreign award enforcement and res judicata limit re-litigation of limitation and public policy objections in execution proceedings.
The Bombay HC held that a prior inter partes limitation ruling in the same enforcement proceedings, having attained finality, operated as res judicata and barred a fresh limitation objection; the petition was therefore within time. It further held that the public policy defence under Section 48 must be construed narrowly and cannot be used to reopen the merits or resist enforcement on asserted FEMA breaches or evidentiary complaints, so enforcement of the foreign awards could not be refused. The Court also held that a composite petition for recognition, enforcement and execution supported an appeal against all respondents, and upheld limited impleadment and execution only to the extent of award debtor assets diverted to associated entities.

Seeking recognition and enforcement of foreign arbitral awards - prescribed period of limitation - Applicability of res judicata - violation of India's public policy. - lift the corporate veil - impleadment of the 2nd, 3rd and 4th Respondents and levy of execution against them - Whether a third party could be made personally liable to satisfy a decree or a foreign award, even though it was not a party to the arbitration proceedings and no award had been made against it. - HELD THAT:- In the present case, E-City or the other Respondents never challenged this Court’s jurisdiction to entertain a Petition to enforce or execute a foreign award. There were no grounds for such a challenge. The only objection to IMAX’s Petition was that it was filed after the prescribed period of limitation. Therefore, even if the learned Single Judge of this Court (Kulkarni, J.) mistakenly held that IMAX’s Petition was within the three-year limitation period prescribed under Article 137 of the Limitation Act, that decision cannot be regarded as a nullity that could have been disregarded at the final hearing of the same Enforcement or Execution Petition. Besides, there is no ground to hold that the reasoning or finding in Kulkarni J’s order about IMAX’s petition being within the three-year limitation period prescribed under Article 137 of the Limitation Act was erroneous. The first precondition for the exception to the application of the doctrine of res judicata, namely that the issue decided involved a pure question of law and not a question of fact or a mixed question of law and fact, is not fulfilled in the present case. Secondly, the expression “jurisdiction” referred to in Mathura Prasad Jaiswal. [1970 (2) TMI 139 - SUPREME COURT] and explained in N.G. Subbaraya Setty [2018 (4) TMI 1901 - SUPREME COURT], refers to the inherent jurisdiction of a Court or the legal competency of the Court to entertain a suit or a proceeding of a particular nature. The examples given in N.G. Subbaraya Setty’s (supra) case bring home this point very clearly. However, the impropriety is evident, as properties and assets valued at Rs.210 Crores held by E-City (1st Respondent) were diverted solely to defeat execution of the liability award. Secondly, in the present case, there is both control of the Company by the wrongdoers and the impropriety, i.e., the Company's use and misuse of them as a device or façade to conceal their wrongdoings. In fact, the wrongdoers have managed to retain complete control over the diverted properties while, at the same time, attempting to render them immune from execution proceedings to defeat the enforcement and execution of the foreign awards. This is not a case in which IMAX is challenging the orders of this Court that sanction the Schemes of Arrangement. Therefore, the arguments that such orders operate in rem rather than merely in personam need not detain us. Even if such orders were made in compliance with the validly prescribed procedures, that by itself would not prevent the enforcing/executing Court from lifting the corporate veil and addressing the impropriety of diverted properties and assets, given the facts in the present case. There are undoubtedly different considerations that apply in the doctrine of lis pendens. Still, the reference is only to show that a transaction may be legal, in the sense that the statutory formalities have been complied with. However, there may still be impropriety, which will entitle the Court to lift the corporate veil, as was held in Balwant Rai Saluja and Anr. [2014 (8) TMI 1084 - SUPREME COURT] There is a distinction between illegality and impropriety that cannot be ignored. Impropriety may not always overemphasise the form but would stress the substance, the motives, the intentions and the final effect of the disputed transaction. That there was nothing wrong in impleading the 2nd to 4th Respondents in IMAX’s Petition. Besides, execution can be levied against those of E-City’s (1st Respondent’s) properties and assets that were diverted to the 2nd and 3rd Respondents for satisfaction of the foreign awards. However, such execution can be only qua the diverted properties and assets presently held by the 2nd and 3rd Respondents, and not against the 2nd and 3rd Respondents independently. It is clarified that there can be no execution against any other properties or assets independently held by the 2nd and 3rd Respondents’ Companies to satisfy the foreign awards. Insofar as the 4th Respondent is concerned, though there was nothing wrong in its impleadment to IMAX’s Petition, since no properties or assets of E-City (1st Respondent) were diverted to the 4th Respondent, there is no question of levying any execution on the 4th Respondent, its properties or assets. IMAX’s petition is held to have been filed within the prescribed period of limitation. IMAX’s petition for enforcement of the foreign awards could not have been refused on any alleged violation of India's public policy. This appeal was maintainable as against all the Respondents. There was no error in impleading the 2nd to 4th Respondents as parties to IMAX’s petition. The foreign awards are recognised and can be executed unreservedly against the 1st Respondent and against the 2nd and 3rd Respondents to the extent of the properties and assets diverted from E-City [1st Respondent] to them under the schemes of arrangements dated 20.06.2007 and 31.08.2007. However, no execution can be levied against the 4th Respondent. To this extent, Dangre, J’s order will have to be set aside or modified. Now that the foreign awards are recognised, they shall have the status of deemed decrees and be executed in accordance with what is set out above. However, this would require constant monitoring and the timely issuance of directions in execution proceedings, such as the attachment and sale of properties. Such an exercise could be best undertaken by the executing Court, i.e., the learned Single Judge. The 1st Respondent has succeeded in frustrating the enforcement of the foreign awards made between 2006 and 2008. Full advantage was taken of the Master Agreement entered into in 2000, and by taking undue advantage of the pressure on the Indian court’s dockets, payments have been successfully resisted for all these years. During the pendency of the arbitral proceedings, the 1st Respondent improperly diverted its properties and assets worth Rs. 210 crores to the associated companies, i.e. the 2nd and 3rd Respondents, with the sole objective of frustrating the execution of the awards or, in any event, further delaying the matters. To borrow the words of the Hon’ble Supreme Court in Vijay Karia [2020 (2) TMI 628 - SUPREME COURT], the first Respondent is “indulging in speculative litigation with the fond hope that by flinging mud on a foreign tribunal award, some of the mud so flung would stick”. For all these reasons, we impose a cost of Rs 5 lakhs on the 1st Respondent, payable within 4 weeks to the Appellant, IMAX. The parties are directed to appear before the learned Single Judge. - Appeal and the pending applications therein are disposed of in the above terms.

2026 (1) TMI 1 - DELHI HIGH COURTFEMA

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Constructive res judicata bars writ challenge to a foreign exchange issue already decided in suit and appeal.
A writ petition under Article 226 could not be used to reopen a foreign exchange compliance issue that had already been framed in the civil suit, decided on merits, and examined again in appeal. The courts had found that the transaction fell within the RBI's general permission and complied with the FERA framework, giving the issue finality. The same controversy was therefore barred from fresh challenge by constructive res judicata and the principle of finality of adjudication. A party's failure to effectively contest the issue in the proper forum did not create a later right to re-agitate it in writ proceedings.

Writ proceedings under Article 226 for reopening of issues sought to be agitated by the appellant therein had already been considered and decided by the Division Bench - underlying writ petition was predicated on violation of statutory conditions within the statutory framework of the Foreign Exchange Regulation Act, 1973 (“FERA”) - RBI approval regarding property transaction - Valid documents before 31.12.1999 - GPA/SPA/Will etc. - HELD THAT:- In light of the clear findings recorded by an Appellate Court under Section 96 of the Code of Civil Procedure, 1908, we are unable to appreciate as to on what grounds a writ Court can examine the same issue again. Moreover, in case the appellant was not satisfied with the findings recorded either by the learned Single Judge in the Original Suit or the observations of the Appellate Court, nothing precluded him from challenging the same in accordance with law. This Court also has to bear in mind the fact that once an issue was framed, though the burden of discharging the onus was on the respondent nos.2 and 3, who were the plaintiffs in CS (OS) 2773/2000, nothing precluded the appellant from adducing proper evidence, whether documentary or oral, in support of the aforesaid contention which could and ought to have been placed in the trial proceedings to vindicate his stand. This would have been the appropriate procedure to be followed by the appellant in order to sustain and prove the stand taken on the additional issue. If the appellant has failed in such endeavour for any reason whatsoever, it would not, ipso facto, vest any right upon the appellant to agitate the very same issue again which has been settled by the learned Single Judge as also the learned Division Bench. Urging that the fundamental question is one of violation of statutory framework, and hence, amenable to writ jurisdiction is unsustainable, furthermore, on the grounds of constructive res judicata too. Law conceives of finality of disputes. Thus, we do not find any merit in the present appeal and the same is dismissed,

2025 (12) TMI 1615 - CALCUTTA HIGH COURTFEMA

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Issues: (i) Whether the sole remaining shareholder could continue the writ petition after the company withdrew from the proceeding; (ii) whether the RBI's permission for allotment of shares against imported second-hand equipment on non-repatriation basis was illegal or contrary to the applicable policy and statutory framework; (iii) whether the challenge was barred by res judicata or issue estoppel in view of the earlier company law proceedings.

Issue (i): Whether the sole remaining shareholder could continue the writ petition after the company withdrew from the proceeding.

Analysis: The dispute concerned an RBI permission that directly affected the shareholding pattern and control of the company. The withdrawal by the company did not, by itself, extinguish the individual grievance of the shareholder, where the impugned decision was said to cause distinct injury to his proprietary and corporate interest. Judicial review under Article 226 is available in appropriate cases where statutory action affects individual rights, even if the company is also affected.

Conclusion: The shareholder was held entitled to maintain the writ petition in his individual capacity.

Issue (ii): Whether the RBI's permission for allotment of shares against imported second-hand equipment on non-repatriation basis was illegal or contrary to the applicable policy and statutory framework.

Analysis: The RBI acted under its statutory power under FERA and relied on the Government's policy directive that direct payment by an NRI against import of second-hand capital goods supported only non-repatriable investment. The Court held that the SIA approval and foreign investment policy did not govern the changed mode of investment adopted in the transaction. The decision was taken on relevant material, after hearing the parties, and no perversity, lack of jurisdiction, or violation of natural justice was established. In judicial review, the Court would not sit in appeal over a reasoned statutory decision taken within jurisdiction.

Conclusion: The RBI permission was upheld and the challenge to it was rejected.

Issue (iii): Whether the challenge was barred by res judicata or issue estoppel in view of the earlier company law proceedings.

Analysis: The earlier company law proceedings did not adjudicate the validity of the specific RBI permission for issuance of 30,55,329 shares against the imported equipment. The pending writ petition had been expressly noticed in the earlier proceedings, and no final finding on the impugned RBI permission had been rendered there. Therefore, the necessary elements of res judicata or issue estoppel were absent.

Conclusion: The objection based on res judicata or issue estoppel was rejected.

Final Conclusion: The intra-court appeal failed, the judgment under challenge was affirmed, and the writ petition challenge to the RBI permission did not succeed.

Ratio Decidendi: A shareholder may maintain a writ petition where a statutory order directly affects his individual rights and the company's control structure, but the Court will not interfere with a reasoned statutory permission granted within jurisdiction and in accordance with the applicable policy, absent perversity, mala fide, or violation of natural justice.

Shareholder standing and RBI permission upheld where statutory allotment decision affected control structure and no res judicata applied.
A shareholder could maintain the writ petition in his individual capacity where the RBI permission directly affected his proprietary interest and the company's control structure, so the company's withdrawal did not extinguish his separate grievance. The Court upheld the RBI's permission for allotment of shares against imported second-hand equipment on a non-repatriation basis, holding that the decision was made within statutory jurisdiction, on relevant material, after hearing the parties, and without perversity or breach of natural justice. The challenge was also not barred by res judicata or issue estoppel because the earlier company proceedings had not finally decided the validity of the specific RBI permission.

Maintainability of the writ petition - non-resident - acts of oppression and mismanagement in the affairs of the company - violation of the principles of natural justice - CLB failed to make out a case for winding up of the company - violation of any right/fundamental right - cost of undue enhancement in shareholding - issue regarding compliance with FERA for the purpose of permission to issue shares HELD THAT:- In the present case, in lieu of his capital contribution Kamal had purchased the second-hand equipment with his own funds, abroad. He had supplied the machinery which was purchased abroad. Such import of second-hand machinery was permissible observing all formalities. It is nobody’s case that the requisite formalities for import was not complied. Since in the present case there was no issue of importation of goods involving outflow of any foreign exchange, RBI has rightly relied upon the DO letter dated 03.01.1994 which governed the transaction carried on by the Company since amount was paid directly by the NRI (Dr. Kamal) against import of second-hand capital goods. Such investment is permissible as manifests from extract of the DO letter dated 03.01.1994, taken note of above, but on non-repatriable basis. In the present case such investment had been permitted and issuance of shares allowed on non-repatriable basis and, therefore, we find no infirmity whatsoever in the permission dated 07.05.2004 granted by the RBI. Insofar as the issue regarding violation of the Foreign Exchange Regulation Act, alleged by Mr. Mukherjee on behalf of Sajal we find no force in such submission. The permission was granted by RBI on 07.05.2004. Much prior thereto the Foreign Exchange Regulation Act was repealed and, in its place, the Foreign Exchange Management Act, 1999 came into effect on 01.06.2000. There is no dispute that under FEMA no permission was required from RBI to allot shares on importation of capital goods to non-resident Indians. The rights and liabilities of the erstwhile FERA were governed by a sunset clause wherein Mr. Mukherjee claimed his client’s rights were preserved under Section 6 of the General Clauses Act. In view of our finding recorded above regarding the approval dated 07.05.2004 being issued by the RBI in accordance with law and under the applicable statutory provisions and directive issued by the Government of India, we find such issue not arising in the facts and circumstances of the present case. No allegation regarding statutory incompetence of the RBI to grant the permission dated 07.05.2004 has been raised. There is also no allegation of mala fide being raised against the GM, RBI, the authority who granted the permission on 17.05.2004. As far as the DO letter dated 03.01.1994 is concerned, the writ petitioner never challenged the same. The RBI decision is founded on such directive. We have given our anxious consideration to the issue. In view of our findings above, we find no infirmity in decision of the learned Single Judge requiring interference by this Court in the present intra Court Appeal. The appeal deserves to be and is hereby dismissed.

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2026 (6) TMI 1016 - HC - FEMA

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Review jurisdiction cannot reopen FEMA merits when statutory remedies remain available and no apparent error is shown.

Review jurisdiction cannot be used to reopen the merits of a writ order where the earlier dismissal rested on the availability of statutory remedies under FEMA. The court treated complaints about delay in issuing the show cause notice, reasonable time, the alleged pre-notification nature of the violation, FDI policy, and factual questions on exit from the company or group company status as matters for the adjudicating authority. It also noted that FEMA provides further appellate remedies, including on questions of law, which reinforced the limited scope of review. No error apparent on the face of the record was shown, and the review applications were dismissed.

Issues: Whether the review applications disclosed any error apparent on the face of the record in the earlier writ order, and whether the petitioners could reopen the merits of the show cause notice notwithstanding the availability of statutory remedies under FEMA.

Analysis: The challenge in review was directed principally against the earlier dismissal of the writ petitions on the ground of alternative remedy. The grounds urged on delay in issuing the show cause notice, the applicability of precedent on reasonable time, the alleged pre-notification nature of the violation, the status of the FDI policy, and factual questions such as exit from the company or the definition of group company were all held to be matters going to the merits, which could be urged before the adjudicating authority. The earlier writ order had already considered the delay issue and had taken the view that reasonableness depended on the facts and circumstances and could be examined in the statutory adjudicatory process. The existence of further remedies under FEMA, including appeal and further appeal on questions of law, reinforced the limited scope of interference in review.

Conclusion: No error apparent on the face of the record was made out. The review applications were not maintainable as a vehicle for re-arguing the merits, and they were dismissed.

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2026 (6) TMI 1016 - HC - FEMA

Foreign Exchange Management Act, 1999

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Foreign Exchange Management Act, 1999

Constitution of India

Review jurisdiction cannot reopen FEMA merits when statutory remedies remain available and no apparent error is shown.

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