2009 (8) TMI 1202 - HC - FEMA

Appeal allowed, order set aside with costs. Show Cause Notice lacked cause of action, revision filed late.

M.I. Enterprises Versus Director of Enforcement

M.I. Enterprises Versus Director of Enforcement - TMI Issues Involved:1. Validity of the Show Cause Notice.2. Authorization and Limitation of the Revision Petition.3. Misreading of the Memorandum and Articles of Association.Summary:1. Validity of the Show Cause Notice:The appellants contended that the Show Cause Notice issued by the Enforcement Directorate was without any cause of action and lacked application of mind. This was admitted by the Directorate in the order dated 8.6.04. The Enforcement Directorate's order supported the appellants' case, stating, 'The charge against the notices that they did not take prior permission of the Govt. with respect to the FDI in the equity shares of the Noticee company is not sustainable.'2. Authorization and Limitation of the Revision Petition:The revision petition was filed by an unauthorized person after more than one and a half years, despite the 45-day limitation period prescribed u/s 35 of FEMA. The Tribunal had previously emphasized the need for proper authorization, as seen in the case of Director, Enforcement Directorate Vs. Starlite Lighting Ltd. The Tribunal noted, 'We cannot say that Shri T.K. Gadoo, DLA, bears any authority to file this revision petition.' The respondents conceded that no mechanism was formed to address these deficiencies until an order was issued on 23.02.2009 authorizing Deputy Legal Advisers. The appellants cited the Supreme Court judgment in State of Punjab and Ors. Vs. Bhatinda District Cooperative Milk Producers Union Ltd., which held that statutory authority must exercise its jurisdiction within a reasonable period.3. Misreading of the Memorandum and Articles of Association:The proceedings were initiated based on a misreading of the appellant company's Memorandum and Articles of Association. The company was engaged in manufacturing, trading, and providing consultancy services related to oil exploration, not in the business of oil exploration itself. The Enforcement Directorate's order stated, 'There is nothing on record to show that the company is engaged in the business of oil exploration.' The Tribunal's decision to impose a penalty was based on the incorrect assumption that the company was involved in oil exploration.Conclusion:The appeal was allowed, and the impugned order was set aside with costs of Rs. 50,000. The judgment highlighted the lack of cause of action, unauthorized filing of the revision petition, and misinterpretation of the company's business activities.