2020 (11) TMI 1080 - HC - FEMA

Court grants stay on proceedings, acknowledges challenges in record-keeping

The court issued notices and granted a stay on further proceedings in response to a notice under the Foreign Exchange Management Act, 1999 and Income Tax ... Call for record under FEMA - reasonable time to call for information - Assistant Director, Directorate of Enforcement has called record/documents from the petitioner exercising power under Section 37 of Foreign Exchange Management Act, 1999 read with Section 133 (6) of the Income Tax Act, 1961 - As LD counsel submits that information sought from the petitioner is of export transactions since 2010 onwards and as such the information which has been sought by the respondent cannot be furnished by the petitioner, as record from the year (2 of 2) [CW-12937/2020] 2010 onwards, cannot be maintained by any person under the law also reasonable time does not mean that information can be called after inordinate delay of about 10 years - HELD THAT:- Issue notice of the writ petition as well as stay application, returnable on 17th December, 2020. Notices be given ‘dasti’, if prayed. In the meanwhile, further proceedings in pursuance of show cause notice dated 24th July, 2020 shall remain stayed. Issues:1. Impugned notice under Foreign Exchange Management Act, 1999 and Income Tax Act, 1961 for record/documents from petitioner.2. Information sought related to export transactions since 2010.3. Lack of time limit under Section 37 of Foreign Exchange Management Act, 1999 for calling records.4. Stay application against further proceedings in response to the show cause notice.Analysis:The judgment by the Hon'ble Mr. Justice Ashok Kumar Gaur pertains to a case where the respondent, an Assistant Director of Directorate of Enforcement, issued a notice to the petitioner under Section 37 of the Foreign Exchange Management Act, 1999, along with Section 133 (6) of the Income Tax Act, 1961, requesting record/documents. The petitioner's counsel argued that the information sought, specifically on export transactions since 2010, cannot be provided as maintaining records from that far back is not feasible under the law. The counsel highlighted the absence of a prescribed time limit under Section 37 of the Foreign Exchange Management Act, 1999, but emphasized that a reasonable time does not encompass an inordinate delay of around 10 years.The court, after considering the submissions, issued notice of the writ petition and stay application, scheduled for a returnable date of 17th December, 2020. It was further directed that notices should be given 'dasti' if requested. Additionally, the court ordered a stay on further proceedings concerning the show cause notice dated 24th July, 2020 until the next hearing. The case was listed to be heard along with other similar matters after proper service.In essence, the judgment addresses the legality and reasonableness of the notice issued to the petitioner, focusing on the practicality of providing information dating back to 2010, and the absence of a specific time limit under the relevant statutes. The court's decision to issue notices, grant a stay, and consolidate the case with related petitions reflects a balanced approach to addressing the issues raised by the petitioner.