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of <h1>High Court Grants Interim Stay on Order: Petitioners Can Apply for RBI Approval</h1> <h3>M/s KRISHIRAJ TRADING LTD & ORS Versus UNION OF INDIA & ORS</h3> The High Court of Bombay granted an interim stay of the impugned order dated 7 August 2013 until further orders. The court allowed the petitioners to ... Application for compounding - Right to appeal - Held that:- if the interim stay of the order dated 7 August 2013 is not granted and if the petitioner does not file an Appeal under Section 17/19 of the Act, the petitioners will loose its right of appeal. If the petitioners file an appeal they will loose the right to have their application for compounding considered. In view of the above, till the respondents file the affidavit in reply and the matter is finally heard, the petitioners rights cannot be foreclosed on both fronts. In view of the above, there shall be interim stay of the impugned order dated 7 August 2013 till further orders. Issues:Challenge to impugned communication dated 17 October 2012 and order dated 7 August 2013; Delay in challenging the communication; Application for compounding rejected by RBI; Interpretation of Circular No. 55 dated 28 June 2010; Contravention of Regulation 6(4) of FEMA, 1999; Time limit for filing appeal under Rule 11 of Compounding Proceedings Rules, 2000; Maintainability of compounding application after adjudication order.Analysis:The judgment by the High Court of Bombay dealt with various issues arising from the challenge to an impugned communication dated 17 October 2012 and an order dated 7 August 2013. The delay in challenging the communication was raised by the Senior Counsel for RBI, arguing that the petitioners should have acted earlier. However, the court referred to a previous decision and observed that the delay was justified, citing provisions of FEMA, 1999 and Circular No. 55 dated 28 June 2010. The court highlighted that the rejection of the compounding application by RBI was based on the sensitive nature of the contravention and the ongoing investigation by the Directorate of Enforcement.Regarding the contravention of Regulation 6(4) of FEMA, 1999, the court examined the petitioner's argument that the contravention was technical in nature, as they were required to obtain government approval for financial commitments in a Joint Venture without equity contribution. The court analyzed a circular from RBI and concluded that the circular did not support the petitioner's case, confirming that the investment was indeed in contravention of regulations.The judgment also addressed the time limit for filing an appeal under Rule 11 of the Foreign Exchange (Compounding Proceedings) Rules, 2000. The Senior Counsel for RBI contended that once an adjudication order is passed, a compounding application may not be maintainable. The court acknowledged the potential loss of appeal rights if the impugned order was not stayed, emphasizing the need to protect the petitioner's rights pending further proceedings.In light of the above considerations, the court granted an interim stay of the impugned order dated 7 August 2013 until further orders. Additionally, the court allowed the petitioners to apply for approval from RBI under a specific circular, without prejudice to their rights and contentions. The judgment aimed to balance the interests of both parties while ensuring procedural fairness and legal compliance in the matter at hand.
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