2022 (3) TMI 943 - HC - FEMA

Seizure Orders Upheld Under Foreign Exchange Law, Release Order Set Aside

Directorate of Enforcement Versus P.C. Financial Services Private Limited and 3 others

The Court upheld the seizure orders under the Foreign Exchange Management Act, 1999, totaling Rs. 270.00 crores. The Single Judge's provisional release ... Legality and validity of the seizure orders - HELD THAT:- The facts of the case reveal that before the learned Single Judge, though a prayer for quashment of seizure orders dated 26.08.2021, 30.09.2021 and 15.12.2021 was made, an interlocutory application was preferred for release of ₹ 15,35,45,317/- and the learned Single Judge has allowed the application. The writ petition itself has been disposed of by the impugned order dated 11.02.2022. In the considered opinion of this Court, once the seizure orders were not set aside and no statutory provision was brought to the notice of the learned Single Judge for release of such amount and the seizure orders have been affirmed by the competent authority under Section 37A(2) of the Act, no such provisional release could have been ordered by disposing of the writ petition itself. Learned counsel for the Union of India has also brought to the notice of this Court the press release issued by the Reserve Bank of India dated 24.02.2022 and the same reflects that even the banking licence of the respondent No.1/writ petitioner has been cancelled. However, as this Court is not dealing with the cancellation of licence, no comment has been offered in respect of such cancellation. Learned counsel for the respondent No.1/writ petitioner has stated that he does not have a copy of the aforesaid order and he is not aware of the same. Section 37A of the Act provides for a remedy of appeal and therefore, as now an order dated 04.02.2022 is in existence, the respondent No.1/writ petitioner shall certainly be free to prefer an appeal or to avail the other remedies available under the law. Resultantly, the order passed by the learned Single Judge is set aside and the writ appeal stands allowed. Issues:Challenge to seizure orders under the Foreign Exchange Management Act, 1999.Detailed Analysis:1. Challenge to Seizure Orders:The writ petition challenged the legality and validity of seizure orders dated 26.08.2021, 30.09.2021, and 15.12.2021 under the Foreign Exchange Management Act, 1999. The petitioner sought quashing of the seizure orders totaling Rs. 270.00 crores. The learned Single Judge had earlier directed the release of Rs. 15,35,45,317/- during the pendency of the writ petition. However, the Enforcement Directorate (ED) clarified that no amount had been released from the seized Rs. 270.00 crores. The ED permitted the bank to disburse Rs. 9.68 crores, which was not seized by the ED. The interlocutory application for release was allowed by the Single Judge, but the seizure orders were not set aside, and no statutory provision was cited for the release. The competent authority affirmed the seizure orders under Section 37A(2) of the Act, and the Single Judge's provisional release order was deemed improper.2. Statutory Provisions and Competent Authority:Section 37A of the Act provides for special provisions regarding assets held outside India in contravention of the Act. The Competent Authority, appointed by the Central Government, must dispose of petitions within 180 days from the date of seizure, either confirming or setting aside the seizure order after providing an opportunity to the Directorate of Enforcement and the aggrieved person. The Competent Authority's order confirming seizure continues until the adjudication proceedings are concluded. The Act also allows for appeal to the Appellate Tribunal against orders passed by the Competent Authority.3. Appeal and Remedies:Given the existence of the order dated 04.02.2022 by the competent authority, the writ petitioner has the right to prefer an appeal or avail other remedies provided by law. Consequently, the order of the learned Single Judge directing release during the pendency of the writ petition was set aside, and the writ appeal was allowed. The Court clarified that it did not express any opinion on the case's merits, leaving all rights and contentions open. The miscellaneous applications pending were closed with no order as to costs.