Court refuses to intervene in FEMA show cause notice challenge, directs consideration of objections within four weeks.

The Court declined to interfere with the show cause notice challenged under FEMA but directed the respondents to consider the petitioners' objection on the provision's applicability and issue appropriate orders within four weeks. The writ petitions were disposed of without costs awarded, emphasizing that challenges to show cause notices should only be entertained in cases of clear lack of jurisdiction or legal basis.

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Issues involved:
The issues involved in the judgment include the challenge to a show cause notice issued under Section 6 of the Foreign Exchange Management Act (FEMA) and the alleged contravention of provisions related to guarantee by a resident in India to a non-resident.

Details of the Judgment:

Challenge to Show Cause Notice:
The petitioners, the Managing Director and former Chairman of a Public Limited Company, challenged a show cause notice issued by the adjudicating authority under FEMA. The notice pertained to a contravention alleged in furnishing a bank guarantee to a non-resident, based on the applicability of Section 6 (3) (1) (J) of FEMA. The petitioners argued that issuing a guarantee to a non-resident was permissible under Section 6 (2) of the Act. The dispute arose from a share purchase agreement involving the purchase of vMoksha entities, where the petitioners fulfilled their obligations, but a breach occurred leading to arbitration proceedings.

Violation of Natural Justice:
The petitioners contended that the respondents violated principles of natural justice by not responding to requests for the return of seized documents and proceeding with the enquiry without considering representations. The respondents issued a show cause notice and refused to provide requested documents, leading the petitioners to offer explanations based on limited records. The petitioners argued that this violated their rights and interfered with the enquiry process.

Maintainability of Writ Petitions:
The respondents raised the issue of the maintainability of the writ petitions, stating that the petitioners had already offered detailed explanations and therefore could not challenge the show cause notice under Article 226 of the Constitution of India. The Additional Solicitor General argued that the petitioners had already responded to the notice and were called for a personal hearing, indicating compliance with natural justice principles.

Decision of the Court:
After hearing arguments from both sides, the Court referenced a Supreme Court decision emphasizing that writ petitions challenging show cause notices should not be entertained unless there is a clear lack of jurisdiction or legal basis. The Court declined to interfere with the show cause notice but directed the respondents to consider the petitioners' objection regarding the applicability of Section 6 (3) (j) of FEMA and to pass appropriate orders within four weeks. The writ petitions were disposed of accordingly, with no costs awarded.

This summary provides a detailed overview of the issues involved in the judgment, including the challenge to the show cause notice, violation of natural justice, and the decision of the Court regarding the maintainability of the writ petitions.

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