FEMA enforcement fairness requires disclosure of recorded search statements and an opportunity to respond during investigation.

In FEMA enforcement proceedings under Section 37, preliminary investigation need not be quashed or stalled at the threshold merely because of objections to the search process or the presence of counsel, but basic fairness requires disclosure of the statements recorded during the search when those statements are relied on. The persons summoned must be given copies of those statements and an opportunity to file their versions before further action is taken. The investigation may otherwise continue in accordance with law, leaving the underlying enforcement inquiry intact while granting limited procedural protection to the petitioners.

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Issues: Whether, in proceedings initiated under Section 37 of the Foreign Exchange Management Act, 1999, the petitioners were entitled to copies of the statements recorded during search and an opportunity to file their versions, while the investigation was permitted to continue in accordance with law.

Analysis: The search and enquiry were undertaken under the power conferred by Section 37 of the Foreign Exchange Management Act, 1999, which authorises officers of enforcement to exercise powers analogous to those under Section 131 of the Income-tax Act, 1961. The Court accepted that the petitioners were not entitled, at the stage of preliminary investigation, to have the proceedings quashed or transferred merely on the basis of allegations concerning the manner of search or the presence of counsel. At the same time, the Court emphasised that persons summoned for enquiry must be treated fairly and that the process should conform to the requirements of law. Since the statements recorded during the search had been relied upon in the investigation, basic fairness required that copies of those statements be furnished so that the petitioners could submit their response.

Conclusion: The petitioners were entitled to receive copies of the statements recorded during the search and to file their versions before the third respondent, but the respondents were free to proceed with the investigation strictly in accordance with law.

Final Conclusion: The writ petitions were disposed of with limited protective directions in favour of the petitioners, while leaving the underlying enforcement investigation intact.

Ratio Decidendi: In enforcement proceedings under FEMA, while the summons and investigation cannot ordinarily be interdicted at the threshold, fairness requires disclosure of the statements recorded from the persons summoned and an opportunity to respond before further action is taken.

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