High Court upholds writ petition against pre-deposit order under FEMA, affirming Article 226 jurisdiction for relief.

The court affirmed the maintainability of a writ petition under Article 226 of the Constitution of India against the order of pre-deposit by the Appellate Tribunal for Foreign Exchange. It held that Section 35 of FEMA does not preclude the High Court's jurisdiction under Article 226, emphasizing that appeals under Section 35 are contingent upon the presence of a substantial question of law. The court underscored that the availability of an alternative remedy does not automatically bar relief under Article 226, and the evaluation of circumstances for waiving pre-deposit falls within the ambit of Article 226.

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Issues Involved:
1. Maintainability of a writ petition under Article 226 of the Constitution of India against the order of the Appellate Tribunal for Foreign Exchange.
2. Applicability of Section 35 of the Foreign Exchange Management Act, 1999 (FEMA) concerning appeals against the order of pre-deposit.

Detailed Analysis:

1. Maintainability of a Writ Petition under Article 226:
- The primary issue was whether a writ petition under Article 226 of the Constitution of India is maintainable against the order of the Appellate Tribunal for Foreign Exchange, which directed a pre-deposit of 50% of the demanded penalty.
- The learned single Judge allowed the recall application of the respondent and held that a writ petition under Article 226 is maintainable. The court emphasized that Section 35 of FEMA does not provide an alternative remedy to challenge the order of the Appellate Tribunal regarding pre-deposit.
- The judgment cited precedents, such as the Calcutta High Court's decision in Shaw Wallace and Co. Ltd. v. Income Tax Appellate Tribunal, which supported the view that not all orders are appealable and that orders incidental to the hearing of an appeal, like pre-deposit orders, do not involve a question of law and hence are not appealable.

2. Applicability of Section 35 of FEMA:
- Section 35 of FEMA allows appeals to the High Court against any decision or order of the Appellate Tribunal on any question of law arising out of such order.
- The appellant argued that the words "any decision or order" in Section 35 are of wide amplitude and cover decisions on pre-deposit. They contended that the existence of an explicit provision for appeal rules out the jurisdiction of the High Court under Article 226.
- Conversely, the respondent argued that Section 35 does not cover orders on pre-deposit as these do not involve a question of law but are based on factual matrices such as financial hardship.
- The court observed that Section 35 is similar to Section 35G of the Central Excise Act and other legislations where it has been consistently held that orders on pre-deposit are not appealable as they do not involve substantial questions of law.
- The court noted that Article 226 does not impose limitations on the High Court's power to issue writs even where there is an alternative remedy. The rule regarding alternative remedies is a self-imposed limitation and not a rule of law.

Conclusion:
- The court concluded that an appeal under Section 35 is not an automatic procedure and is contingent upon the High Court's satisfaction that a substantial question of law is involved.
- The court held that the relief under Article 226 can be refused on the ground of an alternative remedy only if that remedy is effective and equally efficacious.
- The evaluation of circumstances warranting waiver of pre-deposit falls within the purview of Article 226.
- Consequently, the court held that a writ petition against an order of pre-deposit under Section 35 of FEMA is maintainable and dismissed the appeals.

Judgment:
- The appeals were dismissed, affirming the maintainability of the writ petition under Article 226 of the Constitution of India against the order of pre-deposit by the Appellate Tribunal for Foreign Exchange.

Signatories:
- The judgment was delivered by the Chief Justice and Justice S. Muralidhar.

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