2022 (11) TMI 1233 - HC - FEMA

Court Invalidates Show Cause Notices & Orders, Refunds Penalties

First Global Stockbroking P Ltd. Shankar Sharma, Devina Mehra, Auduth Timblo of Goa Indian Inhabitant, Anju Timblo, Sociedade De Fomento Industrial Pvt. Ltd., Fomento Resorts and Hotels Ltd., Raman Maroo, C/o SET India Private Limited, Michael Grindon, SET India Private Limited, (Formerly known as “SET India Limited) Versus R.M. Ramchandani Adjudicating Officer, Adjudicating Authority for Directorate of Enforcement, Mumbai A.K. Bal Special Director, FEMA, Enforcement, Enforcement Directorate, Union of India, John Deere Pension Trust,

The court allowed the petitions, quashing the show cause notices and orders issued by the respondents. Mr. A.K. Bal was not validly empowered under ... Offences committed under the repealed FERA - Appointment of Adjudicating Authority - Classes of officers of Enforcement - proper authorization of the ‘Adjudicating Officer’ - Scope of corresponding provisions of FEMA - Whether Mr. A.K.Bal (Respondent No.2) was specially empowered under Section 50 of FERA to be the Adjudicating Officer? - HELD THAT:- All offences committed under the repealed Act shall continue to be governed by the provisions of the repealed Act as if that Act had not been repealed. Anything done or any action taken or purported to have been taken or done under repealed Act shall, in so far as it is not inconsistent with the provisions of FEMA, be deemed to have been done or taken under the corresponding provisions of FEMA. When an Adjudicating Officer had been appointed before the repeal of FERA but, as could be seen from the Notification dated 1st June 2000 read with Office Order dated 20th November 2002, Mr. A. K. Bal had not been appointed before the repeal of FERA but has been appointed under the provisions of FEMA, therefore, this appointment in our view is not valid in any event to be appointed as an Adjudicating Officer under Section 50 of FERA. Notably, Section 50 FERA refers to an officer of enforcement specifically empowered in this behalf by order of the Central Government. The Impugned Notification states that the Adjudicating Officer was deemed to have been empowered. A plain reading of Section 50 FERA shows that there must be a specific empowerment. A deemed empowerment is impermissible in law. The Impugned Notification is issued in continuation of earlier notification dated 10th July 2001 (appointing Mr. A.K. Bal as the Adjudicating Authority) and also bears reference to Section 49(5)(a) FEMA. It would be pertinent to point out that Section 49(5)(a) seeks to continue the actions under FERA (and not inconsistent with FEMA) under the corresponding provisions of FEMA and not vice versa. Besides this, there is nothing in FEMA authorizing Adjudicating Authority to issue notice for violations under any provision of FERA. It is well settled that where a statute provides for a thing to be done in a particular manner, then it has to be done in that manner, and in no other manner. For the purpose of Section 49(3) FEMA, there has to be a proper authorization of the ‘Adjudicating Officer’ who issues the notice of contravention under the provisions of FERA. Only because an officer has been appointed for the purpose of acting in terms of the provisions of an act, the same would not by itself entitle an officer to discharge all or any of the functions of the Central Government, unless specifically authorized. In the circumstances, we will have to hold that Mr. A. K. Bal had no authority to issue the show cause notices and consequently no order based on the show cause notices could have been passed. Whichever party has deposited any penalty or any amount pursuant to the show cause notices issued or the impugned order, the amounts to be refunded together with interest, if any, within 8 weeks from today. Issues Involved:1. Whether Mr. A.K. Bal (Respondent No.2) was specially empowered under Section 50 of FERA to be the Adjudicating OfficerRs.2. If no, whether the order passed by Mr. A. K. Bal (Respondent No.2) or his successor Mr. R. M. Ramchandani (Respondent No.1), was a valid orderRs.3. What orderRs. What reliefRs.Detailed Analysis:Issue 1: Empowerment of Mr. A.K. Bal Under Section 50 of FERAThe petitioners argued that the show cause notices were issued by Mr. A.K. Bal, who was not legally empowered under Section 50 of FERA to act as an Adjudicating Officer. FERA was repealed on 31st May 2000, and FEMA came into force on 1st June 2000. Section 49(3) of FEMA provides a two-year sunset period within which an Adjudicating Officer could take notice of any contravention under FERA. Mr. A.K. Bal was appointed as Special Director in the Enforcement Directorate under FEMA on 10th July 2001, more than a year after FERA was repealed. The Notification dated 10th July 2001 did not appoint him as an Adjudicating Officer under FERA. An order dated 20th November 2002 attempted to retrospectively empower Mr. A.K. Bal to adjudicate cases under FERA, but the court found this invalid as it did not meet the requirement of being 'specially empowered' under Section 50 of FERA.Issue 2: Validity of Orders Passed by Mr. A.K. Bal or His SuccessorSince Mr. A.K. Bal was not validly appointed as an Adjudicating Officer under Section 50 of FERA, any orders or show cause notices issued by him or his successor were deemed invalid. The court emphasized that the officer must be specifically empowered to adjudicate under FERA, and a retrospective empowerment was not permissible. The court also noted that the effect of the repeal of FERA was to obliterate the statute completely, except for actions commenced, prosecuted, and concluded while it was in force.Issue 3: Order and ReliefThe court quashed all the show cause notices and the orders passed by the respondents. The court held that the notices and orders were issued without jurisdiction as Mr. A.K. Bal was not validly empowered under FERA. The court ordered that any penalties or amounts deposited by the petitioners pursuant to the show cause notices or impugned orders be refunded with interest within eight weeks.Conclusion:The court allowed the petitions, quashing the show cause notices and the orders passed by the respondents. The court found that Mr. A.K. Bal was not validly empowered under Section 50 of FERA to act as an Adjudicating Officer, rendering the notices and subsequent orders invalid. The court ordered the refund of any penalties or amounts deposited by the petitioners.