High Court allows petition under Article 226 for seizure order, permits bank account use for expenses.

The court found the writ petition premature but held that the High Court could entertain it under Article 226 due to lack of an alternate remedy against the seizure order under Section 37A(1) of FEMA. The court directed the Competent Authority to issue a notice of hearing to the petitioner within 60 days and allowed the petitioner to operate bank accounts for daily expenses until a decision is made, excluding royalty payments. The court left all merits of the case open for further consideration.

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Issues Involved:
1. Maintainability of the writ petition.
2. Jurisdiction of the Authorized Officer under Section 37A of FEMA.
3. Validity of the seizure order under Section 37A(1) of FEMA.
4. Alleged violation of Section 4 of FEMA.
5. Impact of the seizure order on the petitioner's business operations.

Issue-wise Detailed Analysis:

1. Maintainability of the Writ Petition:
The petitioner, a company incorporated under the Companies Act, 2013, sought a writ of certiorari under Article 226 of the Constitution of India to quash the seizure order dated 29.04.2022 passed by the second respondent under Section 37A(1) of FEMA. The respondents contended that the writ petition was not maintainable due to the availability of an alternate remedy and that the petition was premature. The court held that although the petitioner had no alternate remedy against the seizure order under Section 37A(1) of FEMA, the writ petition challenging the order was premature. The court emphasized that the availability of an alternate remedy is not a total bar for the High Court to entertain a writ petition under Article 226 of the Constitution of India, especially when the order is passed without jurisdiction or in violation of principles of natural justice.

2. Jurisdiction of the Authorized Officer under Section 37A of FEMA:
The petitioner argued that the authorities under Section 37A of FEMA had no jurisdiction to initiate proceedings against them, as their case did not fall under Section 4 of FEMA. The court noted that the question of jurisdiction raised by the petitioner involved disputed questions of fact and law, which should be determined by the Competent Authority. The court cited the Hon'ble Apex Court's decision in the Management of Express Newspaper (Private) Ltd., Madras Vs. The Workers and Others, emphasizing that questions of fact, though jurisdictional, should be tried by the Special Tribunals constituted for that purpose.

3. Validity of the Seizure Order under Section 37A(1) of FEMA:
The court observed that the seizure order under Section 37A(1) of FEMA is provisional and not final. The Authorized Officer must place the seizure order along with relevant material before the Competent Authority within 30 days. The Competent Authority then has 180 days to either confirm or set aside the seizure order after giving an opportunity to the petitioner and the Directorate of Enforcement. The court directed the Competent Authority to issue a notice of hearing to the petitioner and pass appropriate orders within 60 days from the date of making available a copy of the court's order.

4. Alleged Violation of Section 4 of FEMA:
The respondents alleged that the petitioner made foreign remittances in the name of royalty to foreign-based entities in violation of Section 4 of FEMA. The petitioner contended that the payments were for the use of Qualcomm's proprietary and licensed intellectual property, particularly Standard Essential Patents (SEPs). The court noted that whether the payments made by the petitioner to Qualcomm and Beijing Xiaomi Mobile Software Company Limited could be considered as royalty or whether such payment would attract Section 4 of FEMA is a question of fact that the Competent Authority must decide.

5. Impact of the Seizure Order on the Petitioner's Business Operations:
The petitioner argued that the seizure order had a far-reaching effect on their business, potentially leading to civil death. The court acknowledged the impact of the seizure order on the petitioner's day-to-day business operations and continued the interim order allowing the petitioner to operate their bank accounts for meeting expenses related to daily activities, excluding payment of royalty to foreign entities, until the Competent Authority passes an order under Section 37A(3) of FEMA.

Conclusion:
The court disposed of the writ petition, directing the Competent Authority to issue a notice of hearing to the petitioner and pass appropriate orders within 60 days. The interim order allowing the petitioner to operate their bank accounts for daily activities, excluding royalty payments, was continued until the Competent Authority's decision. All contentions of the parties on the merits of the case were left open.

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